Preamble

The House met at Eleven o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

SOCIAL SECURITY (SUPPLEMENTARY BENEFIT)

11.4 a.m.

The Joint Parliamentary Secretary to the Ministry of Social Security (Mr. Norman Pentland): I beg to move,
That the Supplementary Benefit (Determination of Requirements) Regulations 1968, a draft of which was laid before this House on 18th June, be approved.
The draft regulations provide for increases in the rates of supplementary benefit in accordance with the pledge given by my right hon. Friend the Prime Minister on 16th January last that the most vulnerable classes of the community would be protected against hardship resulting from those price increases which must result from the effects of devaluation on import costs. The increases are timed to come into effect on 7th October in the same week as the increases in family allowances which have already been approved by the House.
This will be the fourth increase in non-contributory benefits since the Government took office and represents the latest step in the Government's work of improving benefits for those who cannot support themselves and whose income would otherwise fall below a reasonable standard. They show that, even in times of economic difficulty, we are determined to hold on to what has been achieved since 1964 and where possible to make further improvements.
The main proposals are for an increase of 5s. in the single householder rate and of 8s. in the married couple rate, resulting in new rates of £4 11s. and £7 9s. a week respectively, to which, of course, is. added provision for rent. For adult non-householders, there is proposed an increase of 3s. on the scale rate plus an increase of 1s. on the fixed rent addition, making a total increase of 4s.

Increases are also proposed in the rates for children and for blind people.
The Government have not confined themselves simply to making compensatory proposals for increases in benefit rates, but have considered whether there were other parts of the supplementary benefit scheme where improvements would be particularly helpful. As a result, we are proposing two other changes.
First, it is proposed that the standard long-term addition, introduced when the supplementary benefits scheme started in November, 1966, should be increased from 9s. to 10s. a week. This addition is designed to provide a margin to meet special expenses commonly found in long-term cases and is payable to those over pension age and to others, excluding the unemployed, of course, who have received benefit for at least two years. I might add that 80 per cent. of those on supplementary benefit receive the long-term addition. For them, the basic rates for a single householder and a married couple will be £5 1s. and £7 19s. respectively compared with £3 3s. 6d. and £5 4s. 6d. when we came to office. The total rate, including the rent addition, for a non-householder with long-term addition will rise by 5s. to £4 15s.
Secondly, it is proposed that the age band covering children aged 11 to 15 should be replaced by two bands covering children aged 11 to 12 and 13 to 15 years by giving a proportionately higher increase in benefit on this occasion for children aged 13 to 15 years.
This change has been made to take account of the increase in requirements at adolescence and arises both from outside studies which have been made of children's development and of experience gained in the supplementary benefits scheme itself. Perhaps I can put the case for it more simply and directly by saying that the change is being proposed in recognition of the fact that the needs of a child aged 13 to 15 are clearly, and perhaps increasingly as the years go by, different from those of a child of 11.
These new supplementary benefit rates will go to about 2½ million people of whom about 1¾ million will be old people. For most of them the amount of the increase will be straightforward,


but there will be some people who, because of the interaction of the proposed regulations with other social security benefits, or with certain specific provisions in the Ministry of Social Security Act, will receive differing amounts. These-people will, of course, be told individually how they will be affected, but it may be for the convenience of the House if I briefly refer to some of the main groups involved.
First, there are families receiving family allowances. When family allowances go up and this increase is not cancelled out by a parallel reduction in the National Insurance dependency benefit, the increases will have to be set against the increased supplementary benefits. As supplementary benefits are designed to bring a claimant's resources up to the appropriate level, family allowances, like National Insurance benefits, have to be taken into account in working out the benefit payable. But, as on this occasion it is proposed that supplementary benefits should be increased at the same time, in almost all cases by more than the amount of the family allowance increase, the effect will be, in general, that the total income of the family will be increased by the full amount of the supplementary benefit increase.
The exception to this will be those families which are wage-stopped, that is, those whose benefit is restricted to the amount which the breadwinner could be expected to earn if he were in work. Where the wage-stop applies, then under the Act supplementary benefit will not be increased, but these families will receive the full benefit of the increased family allowances, because these are payable whether or not the recipient is in work and are therefore ignored in calculating the wage-stop level.
Secondly, there are people receiving more than the ordinary rate under the Supplementary Benefit Commission's exceptional circumstances powers because they have special expenses; for example, for extra food or domestic help which they cannot meet or wholly meet from any long-term addition. As I have explained, the long-term addition is meant to cover special expenses up to 9s., which is to become 10s. as a consequence of the Regulations, but it is in no sense a

maximum figure and more can be paid when it is individually warranted. Because these people are already getting more than the long-term addition, they will not in general benefit from the increase in it. What will happen is that the amounts for their special expenses will remain the same on 7th October, but 10s. instead of 9s. will be covered by the long-term additional.
This reflects the fact that for the most part any increase in the cost of special expenses is met as and when it is found to occur without the need to wait for a general increase in benefits. For example, if the cost of domestic assistance goes up, the Supplementary Benefits Commission can help to pay for the extra cost at once. The exception to this is where a fixed sum is laid down for the cost of a special diet, where the Commission, on medical advice, has laid down standard figures for special expenses. The Commission has decided that, on the basis of the proposals in the Regulations, these figures should be increased by 1s., so that for these cases the 1s. increase in the long-term addition will in the ordinary case not be offset by a reduction in any exceptional circumstances addition which is needed.
Finally, there is the claimant who pays an inclusive charge for board and lodging. His requirements are not based on the rates in which changes are now proposed, but, under the Ministry of Social Security Act, are determined by the Supplementary Benefits Commission. Currently, his requirements are taken as the amount he pays for his board and lodging plus £1 7s. 6d. for personal expenses. The Commission has decided that this allowance for personal expenses should be increased in line with the other changes by 2s. for a single person to £1 9s. 6d. and by 4s. for a married couple to £2 10s.
The proposals which I have outlined would increase the cost of supplementary benefits in a full year by about £44 million on existing cases. This compares with the estimated net cost of supplementary benefit in the present financial year of £394 million. The draft Regulations affect the lives of about 2½ million families. The task of putting into effect the higher scales of requirements by 7th October will fall on the staff working on


supplementary benefits in the Ministry and it is, of course, because of the size of this task that we are asking the House this morning to approve the draft Regulations at this time, so that the increases proposed can be brought into operation well before the winter. I therefore confidently ask the House to agree to the Motion.

11.18 a.m.

Mr. Marcus Worsley: The Joint Parliamentary Secretary has treated the House to a very clear exposition of these draft Regulations and we are grateful for them. He mentioned the figure of £44 million and qualified it by saying that it was based on existing cases. I appreciate his difficulty about giving the cost, but the House would be interested to know the sort of estimate which the Ministry has made of the actual cost, because we are dealing with a lot of public money. Obviously, an increase in supplementary benefit scales of this sort brings more people within the scope and therefore expenditure will be rather higher than the £44 million, and I shall be interested to know, perhaps based on precedent, what sort of figure the Government have in mind.
These Regulations are necessary—and we will support them—because of the sharply falling value of the £ under a Socialist Government. As always in these recent years, and even more in this year, Socialism and inflation go hand in hand. As always, the people have to pay for Socialism.

Mr. Speaker: Order. The hon. Gentleman must not widen the debate, or the points he is making will have to be answered.

Mr. Worsley: With great respect, Mr. Speaker, the Parliamentary Secretary advocated these Regulations on the ground that they were fulfilling a Government pledge to protect the weakest in society. But I accept your Ruling and will not pursue this. The point is clearly enough taken.
I want to discuss the actual rise proposed. Supplementary benefit was last raised on 31st October last. At this stage we cannot judge accurately the extent to which prices will rise before next October. Even now there is a whole quarter to go, and heaven knows what

may happen under this Government. The last cost-of-living index figure that we have to work on was for May. I am told that not until the end of next week will we get the June figure. To use a former Prime Minister's words, we are working somewhat on last year's Bradshaw.
Let us look at the figures and consider whether these Regulations represent an improvement or merely show the Government running to stay in the same place. On the main figure, the Index of Retail Prices had risen 4·3 per cent. since last October. This present increase is 6 per cent., and the likelihood is that by October that figure will have been reached comfortably, and that by the end of this year the value of supplementary benefits will once more be less in real terms than was its value in October last.
The Government have prophesied a 5 per cent. rise in prices this year, of which 3 per cent. will be due to devaluation and 2 per cent. to the Budget and rises in costs of nationalised industries. In other words, there will be a 5 per cent. rise in prices due to things under Government control, or as a result of Government action. We can be absolutely confident that, whatever the rise turns out to be by the time these Regulations come into force, it will be at least 6 per cent., probably more. The right hon. Lady will know that the figure of 7 per cent. has been widely canvassed as the likely rise in prices during the current year.
Much of this rise has been the result of deliberate Government policy, from S.E.T. onwards. By these Regulations the Government are just, but only just, putting the record straight for those on supplementary benefit. For all those on National Insurance benefits, industrial injury benefits, war pensions, service and occupational pensions—all those on small fixed incomes—there will be no help at all, unless perchance they are brought within the supplementary benefits scale. This is the gravamen of the charge against the Government—that rising prices have corroded benefits, corroded the value of savings and hence the living standards of those living on fixed incomes. These Regulations are an appalling confession of the Government's failure to maintain any control on prices. So much for the boast of the Prime Minister, that the £ in one's pocket would not be devalued.
The figures that I have quoted are from the ordinary cost-of-living index, which has been accepted as the criterion for all these matters. The Minister will be aware that on Wednesday her right hon. Friend the Secretary of State for Employment and Productivity received a Report from the Cost of Living Advisory Committee, which, the House would agree, is of the highest importance. I am aware that the right hon. Lady is not Ministerially responsible for this Report, or directly responsible for its implementation. She will appreciate its extreme importance for her Department, and I hope that without trespassing, she will be able to make some comments upon it. This is the first time that the House has had a chance to debate the Report's conclusions.
The Report advocates a separate index for pensioners. Pensioners form the overwhelming majority of those on supplementary benefit. In advocating this, it is shown that prices which affect pensioners have risen since 1962 considerably faster than the index as a whole. Taking January, 1962, as 100 per cent., the ordinary index in January of this year was 121·9 per cent. The pensioners' household index is assessed in this Report at 126 per cent. The reason was that various items within the budget of the pensioners were quite different from those of the ordinary average householder.
If housing was excluded from the index, then the ordinary index was 120 per cent. and the pensioners' 122 per cent. In other words, on the most favourable showing, the difference was 2 per cent. and on the least favourable, 4 per cent. I think that we must take housing into account in considering these matters. The position is worse for pensioners than the usually accepted figures show, and this is very important. I understand that the Secretary of State for Employment and Productivity has accepted the need for this new index. I hope that the right hon. Lady will be able to say when it will be introduced, and above all, whether she intends to make use of it in the calculations made by her own Department.
These benefits have to be based on a careful assessment of need in the households to which the payments are to be made. Average figures were bandied

around, but they can hide a lot of hardship. I am reminded of an old chestnut of a story, about the lift attendant in the United States who, asked by a visiting Englishman what was the average tip, replied "half a dollar". The Englishman gave him the half dollar, and the comment of the liftman was "Man, that is the first time that I have ever been given the average tip."
I would like to know on what firm evidence these figures are based. If the index of retail prices is shown to be misleading in the effect of changing prices upon pensioners, which assumptions are correct? Is the relationship between married and single rates still correct? This has been sacrosanct since Beveridge. Has there been a careful study of need in all the circumstances, as commodities have obviously risen enormously in price? I have wearied the House before on this matter. It seems that the difference in need between a single household and a household with two people cannot be as wide as the gap between these two figures suggests. My own experience suggests that one probably has more hardship in single households, for many matters are so critically important. Paragraph 47 of the Report shows how true this is. As an example, one needs no less fuel, perhaps marginally more, in a single household.
These items play a bigger part in the pensioner household than in households as a whole. I wish to be assured that careful consideration has been given to the relationship between these two figures. I should like to be proved wrong, but my feeling is that I am not.
Are there no regional variations in need between the pensioner in Aberdeen and the pensioner in Torquay, or between pensioners in London and in a country village? The Report advocates a feasibility study to see whether another index to measure this aspect could be created. Do the Government accept this? Will it be pressed ahead and will it be taken into account when the scales which we are debating are considered? Do the present rates make sense for the different categories of people who draw supplementary benefit?
In spite of some changes over the years, particularly the 9s., now the 10s., supplement to which the hon. Gentleman


referred, and the changes for older children in the Regulations, which we welcome—they are a step forward—it is still basically true that this is a flat-rate system. Yet the supplementary pension for a retired person is different from the supplementary allowance for, say, an able-bodied man who is out of work. Need they be so closely linked?
Taking the period since 1948, under all Governments, National Assistance, now supplementary benefit, has risen more sharply than prices and earnings. In round terms, average earnings trebled up to January this year. Assistance or supplementary benefit rates have risen by about 3½ times. I have indicated how much can be hidden in an average figure. My impression is that the rates of pay for the lowest wage earner have risen less relatively than the rates of pay for the higher wage earner. The result is that more and more people find that it pays them better to draw supplementary benefit than to do a job.
That is reflected in growing public irritation, often anger, at abuse of this fact by some people. I do not believe that the numbers concerned are very large, but a few cases can cause a lot of concern and can be very discouraging to the thrifty majority. They can throw the whole system into disrepute. The great majority would prefer to work; of that I have no doubt. Certainly, the great majority of wives want their husbands out of the house; of that I have no doubt, either. But it puts a strain on integrity when a low-wage earner with a large family can get much more if he does not work.

Mr. Pentland: The hon. Gentleman refers to the abuse of supplementary benefits. Has he not just quoted what my right hon. Friend the Minister has already said?

Mr. Worsley: Not consciously. I realise that the right hon. Lady, at by-elections, made remarks on those lines, and I hope very much that she will have something more to say to the House today and that it was not just a question of by-election blues. If her eloquence and mine march side by side in this matter, that is to my pleasure rather than my disadvantage.
The improvements in the wage-stop rules, particularly the rule which reduces

its operation from six to three months and the rule which introduces, as it were, a national labourer's wage—

Mr. Speaker: Order. We are debating increases in supplementary benefits.

Mr. Worsley: I am grateful, Mr. Speaker.
The improvements to which I have just referred are not dealt with in the Regulations. On the other hand, it seemed to me that they were relevant to the consideration—

Mr. Speaker: Order. We are not debating social security in general and all its problems. We are increasing certain supplementary benefits. That is what we must talk about.

Mr. Worsley: Thank you, Mr. Speaker. I accept your Ruling that to go further into this matter would involve discussion of family allowances, a minimum wage, the rules for unemployment benefit, and so on.
I realise that we cannot pursue that matter in detail. Nevertheless, it would be misleading the House and the country if we did not refer to the concern which there is in the public mind on this subject. Unless the whole system is to be discredited, the public must be reassured that this change of ratio and this increase in the number of people who can be better off by not working, there will be increasing contempt and worry about certain aspects of the social services which would be thoroughly undesirable. I hope that the Government review will include this matter.
I conclude with a general question to the Government. The Regulations increase supplemenetary benefit, but within the framework of what has been done in the past. Can the Minister tell us what are the Government's intentions about supplementary benefits? In 1964, the Prime Minister promised a minimum income guarantee scheme and said that it would be introduced without delay. Have the Government dropped the idea? The right hon. Lady will agree that the renaming of National Assistance as supplementary benefit, which was all that happened, although, I admit, it had greater success than I imagined it would in inducing more people to take it, it did not turn it into an income guarantee system of the sort which the Labour Party proposed when it came to power.
Do the Government envisage the present system continuing indefinitely? Does the Minister envisage that when changes are made in the National Insurance scheme a system equivalent to or the same as this will continue? In considering the rises which are proposed, it is clearly important for us to know whether this is one of a series of rises and the system is likely to continue in the same way, or whether when the great review comes at last before the public's gaze, four or more years after it was announced as a matter of urgency, this type of supplementary benefit is to be ended?

11.39 a.m.

Mr. George Wallace: I, too, welcome the increases, although I have a rather uneasy feeling that they will prove to be insufficient. I do not intend to imitate the general political knocking in the middle of the speech of the hon. Member for Chelsea (Mr. Worsley), but it is to the Government's undying credit that sweeping changes have taken place in social security. A great degree of humanity is being shown today that did not exist not so many years ago. Since 1964, there has been a tremendous social revolution. Many thousands are now being taken care of that previously were in dire need and nobody except the few charitable persons even knew or cared. The more fortunate are taking care of the less fortunate, and this is as it should be. It is pure Socialism as we on this side of the House understand it.
I am concerned about the tendency in all sections of society to denigrate the great changes taking place in social security by applying generalised descriptions to those who receive benefits, such as "spongers", "layabouts", and "work-shy". On both sides of the House we have said from time to time that we expect the Ministry's officials to act with great care, humanity, understanding, discretion and tact. There is not the slightest doubt that they do so. In my constituency and in all others the officials are doing their best to be human and to deal with people with great care, particularly old people. I pay my tribute to them.
But it is true that human nature being what it is and always will be there must

be some offenders. Action is being taken, and must be taken. But the House must remember that even when we deal with these people they must live. Let us not exaggerate the position. They are an extremely small minority.
There is a great danger of the whole scheme being undermined by foolish exaggeration. Statements like those made in the Daily Mail on 10th July serve only to cloud the public mind and increase suspicion. Such statements, many of them without proof, are frequently made by all sections of the community. Constituents of mine, working people, have talked to me about those on what they still call National Assistance as though they were a separate section of the community being fed and nurtured by the average working man. People in other sections of the community, who can easily look after themselves, often tend to tell others how hard they should be working, when they themselves are living comfortably without doing much work. These statements are made, and the implications need to be refuted.
In answer to a Question of mine on 5th July, my hon. Friend the Joint Parliamentary Secretary told me who are the people that receive supplementary benefits in the area covered by the Norwich office of the Ministry. We want to know and the public should know who are the people that benefit. In May, 1968, in that area there were 10,100 retired pensioners, 250 widows over 60 and 1,200 other persons over pension age. That is 11,550 out of the 15,300 receiving supplementary benefits. The others were the sick, disabled, and so on, including 1,100 unemployed. The number of people who can be described as taking advantage of the scheme and bleeding the taxpayer white is tiny. That list printed in HANSARD is an indication of the wide scale over which the scheme operates, giving dignity to a great number of people.
Complaints have been made. There was one in my local newspaper by a constituent who complained of the people being taxed, retaxed and taxed again so as to give recipients of supplementary benefits an easy living. It is the responsibility of us all to see that these people, particularly the old-age pensioners, do get an easy living. One should reply to


such charges with the simple quotation that we should bear one another's burdens, and, indeed, do so.
Provided that the nation realises its responsibilities, and the facts are given of the benefits of the scheme and the people covered, there is no danger of society's being undermined. I think that the great majority of people accept their responsibilities. The statement in the Daily Mail that living off the state is a national disease is a gross distortion of the great social changes that have taken place, and a reflection on the people now benefiting, particularly the old-age pensioners, honest, decent people who have served their country and who deserve all the assistance we can give.

11.46 a.m.

Mr. Tim Fortescue: While I agree with every word my hon. Friend the Member for Chelsea (Mr. Worsley) said, I had intended to keep right away from political matters and make an entirely non-political speech. But I must chide gently the hon. Member for Norwich, North (Mr. Wallace).

Mr. Speaker: Order. It will help the reporters if the hon. Gentleman will speak up.

Mr. Fortescue: I must childe gently the hon. Member for Norwich, North for claiming as the unique prerogative of Socialism the system whereby the more fortunate look after the less fortunate.
In this country one can trace that attitude back at least to Queen Elizabeth I, with the Poor Law. In more recent times, during the famous 13 years of Conservatism, there was a good deal of the more fortunate looking after the less fortunate. It is not simply Socialism that has done this, and the Socialist Party should not take it to itself uniquely.
To some of us, if not all, there is something distasteful, almost abhorrent, in a group of well-paid, comfortably-off people having to calculate whether the least fortunate in the land should have another 1s. 6d. a week. There is no alternative and I do not in the slightest degree wish to denigrate the efforts of dedicated civil servants who have to do it. I myself should not like to have to try to work out whether the poorest need another 1s. 6d. to bring them up to

a just tolerable level of income and comfort. It must be a task for heroes, and I bow to those who must do it, including the Ministers and Members.
I should like to think of other ways in which the people who draw supplementary benefit can be helped, quite apart from the financial way which we are discussing. I think that my remarks will be strictly in order. The Minister may know, and if she does not I am delighted to tell her, that in the City of Liverpool a way has been found to give such assistance.
In the huge housing estate of Speke, in my constituency, and in other housing estates in Liverpool, the city's Welfare Department has set aside houses and flats where what are known as problem families are looked after for up to six months. This was a brave thing to do, because there is a great housing shortage in Liverpool. In most cases the families are looked after by a devoted woman, a house mother, as it were, who teaches them how best to spend the money they have. She teaches them household budgeting, how to keep the place clean, how to feed the children, and how best to live on the very exiguous income that the family has either by the breadwinner's own efforts or through benefits.
After a few months the family is sent out into the world again; another is taken into the same premises, and the whole process starts again. It is a most valuable side of our welfare services which should be encouraged in every possible way.
Can the right hon. Lady see any way of encouraging such care for the poor, so that a part of the huge sums of money which we are now spending on supplementary benefits—£394 million at present rates, as we have heard this morning— could perhaps be diverted to teaching people how to spend their own incomes better, rather than giving them additional money and letting them get on with it?

Mr. Speaker: We cannot now talk about diverting the sum of £394 million. We are talking about a £40 million increase in supplementary benefits. The rest of what the hon. Member said was in order.

Mr. Fortescue: I had concluded my remarks, Mr. Speaker.

11.50 a.m.

Mr. Kenneth Baker: When I first read the details of these Regulations in HANSARD on 17th June I had the impression first of all that there was going to be a real improvement in the actual level of benefits, but having done my sums subsequently I found that these increases we are discussing this morning are not collectively an act of progress but an act of restoration, for they are restoring to supplementary benefits the level of purchasing power which the supplementary benefits had in October of last year. That is the purpose of these Regulations.
The reason why my hon. Friend the Member for Chelsea (Mr. Worsley) touched upon the matter of the cost of living is that it is fundamental to what we are discussing, because the cost of living, as everybody well knows—I am not making a party point now at all— has gone up substantially this year. The Retail Prices Index has gone up 4·3 per cent. between last October and May. What is more important is the increase in food prices, and this is the more important because recipients of supplementary benefits spend a very high proportion of their supplementary benefits on food. The increase in food prices since October, 1967, has been about 5·6 per cent. Later this year, the Government have predicted, prices will go up by at least another 1½ per cent. to 2 per cent. This is one of the very few economic predictions they are prepared to make with any degree of certainty. So the increases we are talking about this morning barely take those increases into account.
The increase for the single householder is 5·8 per cent. and that for a married couple 5·6 per cent. So these Regulations are a very expensive way of marking time—a very expensive way, £44 million we are to approve this morning, and yet, as a result, nobody who draws these benefits will be any better off in real and absolute terms than he was in October, 1967.
The declaration which the Prime Minister gave in November last year on devaluation, and again on 16th January, 1968, is an undertaking we would all welcome, that of protecting the poorest people in our society. But how shabby and inadequate that declaration is. We should commit ourselves, as indeed both

parties, as indeed all politicians, in this country do, to definite improvement in the position of the poorest people of this country, and it is most regrettable that, after this enormous expenditure of £44 million, the position of the very poorest people is not going to be any better than it was in October, 1967.

Mr. David Winnick: What about October, 1964?

Mr. Baker: The other point I am coming on to is that there are some people who are going to be very much worse off who are not covered by these supplementary benefits. I have in mind—

Mr. Speaker: Order. It is those who are not covered by the supplementary benefits of whom we cannot talk today.

Mr. Baker: I take your point, Mr. Speaker. I am trying to elaborate the point that there are many people not covered by the Regulations who are some of the most under-privileged and desperately poor people in our community today. Take, for example, the widow who has a pension of £4 10s.—by October, 1967, standards. The purchasing power of her widow's pension today, if she does not receive any supplementary benefit, is £4 5s. 6d. So these people who are on fixed pensions of this sort, war disability pensions—

Mr. Speaker: Order. I am sorry to interrupt the hon. Member, but a debate on Regulations is confined to what is in the Regulations. The hon. Member can argue about those who are getting supplementary benefits, he cannot argue about those who are not getting supplementary benefits. Not in this debate. He must find some other debate.

Mr. Baker: Thank you for your Ruling, Mr. Speaker.
I will move on to the actual details of the Regulations and to where I think there is a considerable inconsistency. The point I was making very simply was that these Regulations are essentially a process of marking time. Nobody will take a step forward as a result of them, and in fact some people will take a step back. Coming to the details of the Regulations, and I am one of the few speakers who has come to the details of the Regulations, I should like to ask the Minister


a specific question about those relating to blind persons.

Mr. William Molloy: I should not like that remark to go on the record without correction. The first thing which the hon. Member for Chelsea (Mr. Worsley), speaking from the Opposition Front Bench, said was to compliment my hon. Friend on his exposition of the Regulations.

Mr. Baker: I thank the hon. Member for his intervention and I thank the Joint Parliamentary Secretary for reading out the Regulations very carefully and not missing a comma.
The question I should like particularly to ask the Minister is about the supplementary benefit increases for blind persons. The increase for a single person who is not blind is 5s. a week, or, percentage-wise, 5·8 per cent.; for a married couple who are not blind, it is 8s. a week or 5·6 per cent. Coming to the blind persons we find that for these people, who, of course, suffer a high degree of disability, the increase, for a couple living together of whom one is blind, is only 4·9 per cent., namely, 8s., and for a couple living together who are both blind, an extreme degree of affliction, the increase is only 4·4 per cent.
I should like to know why there is a difference here, why the rate of increase applicable to those not blind is higher while those who are blind get a lower rate of increase, when the increase for the blind should be not 8s. but 10s. 6d. by the standard which is applied to the non-blind. My hon. Friend the Member for Liverpool, Garston (Mr. Fortescue) referred to heroes who did the calculations. I can only assume that they have not been very heroic in this matter because they have not got their sums wrong, and I can only assume that there must be a reason for this differential increase, and, if there is a reason. I should like to know why the blind do not get a bigger increase instead of a smaller increase.
We are talking about an expenditure of some £44 million, a very large sum of money, and I think it is a cause of deep regret to many people in this House and on both sides of it that as a result of this expenditure many people are not really going to be any better off, and I believe that if this process, of increasing

the benefits but not taking into account inflation and purchasing power, is to go on, then obviously they will have our sympathy and that of both sides of the House. This is a very expensive process, because we are having to run very fast and spend a great deal of money to stand still.
There are many groups, particularly the elderly, who are not going to get the right sort of benefit under this scheme. I have in mind particularly the sort of cases I seem to get frequently in my constituency, the case of the elderly widow or spinster, the woman living alone, who probably draws a fixed pension of some sort and can draw supplementary benefit. Both these sorts of people have a particularly raw deal under our social security system, a particularly raw deal, and this, alas, is beginning to be shown in books, such as, for example, that by Professor Townsend, and the Ministry of Health's study of the aged. They are beginning to identify a particular need.
I believe that the £44 million would have been much better spread if it had been spread on selective and identifiable need. I hope that hon. Members opposite will become more committed to this thought, since this is an enormous amount of money from which there will be little real improvement. When we next come to discuss increases in supplementary benefits, I hope that particular attention will be paid to the remarks made by my hon. Friend the Member for Garston that we must identify need, such as chiropody need, home help need, "meals on wheels", and so on, so that increases are made also in care benefits. This is the only way to mitigate poverty and to move towards its abolition.

12.1 p.m.

Mr. William Molloy: I rise in the briefest of interventions to say that I believe my right hon. Friend should be congratulated on introducing the Regulations in an effort to maintain what was commenced by the Government, namely, the greatest improvement in our social services that the country has ever known. The hon. Gentleman the Member for Acton (Mr. Kenneth Baker) said that the result is to catch up with the position as it was in 1967. If the Regulations were to try to catch up with the position in 1957, £400 million


would not be enough. The probability is that it is not generally understood that my right hon. Friend must take cognisance of the Supplementary Benefits Commission.
I am grateful that this has been done with reasonable speed so that the fallback which has affected those who are in receipt of benefit has now been made good. Many hon. Members would like to see an improvement on this figure for the reason that originally it should have been a larger figure. But this does not detract from the argument that the Regulations maintain a standard which was set by the Government in 1964-65, the like of which we have never before seen. I believe that many hon. Gentlemen opposite are sincere in their study of the problem, and they should agree that the Regulations operate for the benefit of the mass of ordinary people. They ought not to dig up the odd one or two people who exploit the social services. The House cannot legislate on the existence of a minority of cheaters.
It takes me back to the days when many of us lived in grinding poverty, and those were not the days of Queen Elizabeth 1. We had to suffer the humiliation of liars, in the House and elsewhere, who told us that we would keep coal in baths we did not have. This attitude is still extant among sections of the party opposite. I hope, therefore, that my right hon. Friend will not be deterred by the jealous criticisms of hon. Members opposite who are jealous of the fact that they did not do what they ought to have done and jealous of the fact that we have done it. I congratulate my right hon. Friend on introducing the Regulations. I hope, if the need arises, that she will not hesitate to bring further Regulations to the House.

Mr. Speaker: Order. I am in difficulties. I am not blaming the hon. and noble Gentleman, but hon. Members who seek to catch my eye and then change their minds. It is a rather temperamental morning.

12.5 p.m.

Mr. Peter Tapsell: We all recognise the need which the Regulations are intended to meet; we are glad to see

them brought forward and happy to support them.
I have three points I wish to make. My first point is that the mere necessity for the Regulations indicates the alarming rate at which prices are rising as a result of devaluation.
Secondly, the Regulations will help only one-quarter of the retirement pensioners and one-fifth of the widows, while many others in both those categories and other people living on small fixed incomes are suffering increasing hardship from rising prices.
My third point is the most important one. Perhaps I could have the Minister's attention for a moment, because I have a Parliamentary Question down to her on Monday on this point. She referred in her speech at a recent borough election to the growth in the number of lead-swingers who were drawing supplementary benefit to which they were not entitled. During ten years since I first entered the House I have noticed that an increasing number of my constituents complain to me about abuse of the social services and particularly of supplementary benefits. I must admit that when I press them they nearly always refuse to give me specific chapter and verse. The fact remains that the number of criticisms of this kind which reach me—and which I assume reach the right hon. Lady otherwise she would not have made the remark she did—is growing.
Since I believe that the existence of supplementary benefits and the concept of them as being an inherent part of our social services and a form of benefit to which people are just as entitled as they are to any other, it has been a healthy development. The stigma which used to be attached to it, and which still is by older people, is less felt by younger people. That is desirable. We all want to see our affairs run in a humane and Christian way. Where there is real need the Supplementary Benefits Commission has a vital part to play and we all support it in doing so.
As my hon. Friend said in his opening remarks, the success of the policy depends upon continued public confidence in it. If there has been a growth in the extent of abuse, and if there are people who draw supplementary benefit to which they are not entitled, I hope


that we shall hear from the right hon. Lady what steps she intends to take to try to stop this.

12.9 p.m.

Mr. David Winnick: I believe that there are very few people who abuse the social security system, and those few are people whom I would describe as having personality difficulties. If, for example, the two hon. Gentlemen opposite were to see the people who abuse our social security system they would find no one from their old school because old Etonians who do not wish to work, and there may be one or two, can do so without going on supplementary benefit.

Mr. Speaker: Old Etonians are not dealt with under the Regulations.

The Minister of Social Security (Mrs. Judith Hart): Would I be in order, Mr. Speaker, in telling my hon. Friend that in fact some, a very few, of the people who are abusing the scheme are from public schools.

Mr. Winnick: The supplementary benefits scheme as it applies to retired people is a great advance on what has existed before. The supplementary scheme as it applies to retired people who have to live on State pensions is a right, it is not a charity. The failure of the old system was that so many retired people refused to draw National Assistance when they were entitled to it for the reason that they looked upon it as a charity. To a large extent, I believe that the Ministry has been far more successful in convincing a great many retired people that they can get supplementary benefit as of right, and that is a considerable advance on the old system.
The hon. Member for Chelsea (Mr. Worsley) asked how long the supplementary benefits scheme will remain in existence. I do not know what the Minister will say in reply but, as I understand the position, the supplementary benefits scheme will remain in existence for a long time to come, simply because there is no other alternative. Unless the existing old age pension is increased substantially, it is only right and proper that we have a supplementary scheme to ensure that people receiving the old age pension can, if necessary, claim a little

more to give them a decent standard of life.
I have been told that the value of the old age pension now is 20 per cent. higher than it was before we came to office. That is a tremendous achievement—

Mr. Speaker: Order. On these Regulations, we cannot discuss the old age pension. The hon. Gentleman knows that they are about supplementary benefits, which are being increased under them, so he must talk about supplementary benefits.

Mr. Winnick: I am grateful, Mr. Speaker.
It is necessary to have supplementary benefits, but it is also necessary to increase them from time to time. Although I am pleased with what is being done, I am sure that my right hon. Friend would be the first to agree that there are still many retired people who have a job to make ends meet, and no one can be complacent about their difficulties.
Can the Minister look at the position of retired people who are council tenants and who normally receive a rent rebate? If they receive supplementary benefits, that rebate is taken away by the council. I have been informed about a number of council tenants in receipt of supplementary benefit who no longer receive rent rebates from the local authority and seem to be in a worse position than before. It is perfectly true that the amount of rent is paid by the Ministry of Social Security, but I am told by some of my constituents that they are in a worse position than if they were receiving the rebate. Perhaps my right hon. Friend will look into that problem.
My final point relates to heating arrangements. I believe that my hon. Friend the Parliamentary Secretary said that heating arrangements are allowed, and we know that quite a number of retired people receive such arrangements. But could more be done? It seems that many retired people receiving the old age pension and supplementary benefits still find it difficult in winter months to warm their rooms sufficiently. Suggestions have been put forward for heating arrangements, and I hope that my right hon. Friend will look at them.

12.12 p.m.

Lord Balniel: These Regulations are designed to protect those living on supplementary benefit from the full impact of rising prices which are consequential partially on devaluation and the rising cost of imports, partially upon the normal inflationary process in our society, and partially on the Budget itself
The arguments on behalf of the Opposition has been put forward comprehensively by my hon. Friend the Member for Chelsea (Mr. Worsley). I only want to speak on one or two broad issues. However, shortly before the debate began. I thought that I ought to look at the debate which took place on 24th July, 1967, when the Government last introduced proposals to increase supplementary benefits—on 30th October, 1967. It so happens that the volume of HANSARD fell open at a speech by the Chancellor of the Exchequer on the same day.
In the course of his remarks, he said:
Let there be no dodging about this. Those who advocate devaluation are calling for a reduction in the wage levels and the real wage standards of every member of the working class in this country. They are doing this and the economists know it.
He went on:
I just do not want either to devalue our own word or to bring down the standard of life of our own people.
Then some bright spark, an anonymous hon. Member, cried out:
Well done Jim!"—[OFFICIAL REPORT, 24th July, 1967; Vol. 751, c. 99–102.]
Today, almost a year later and after devaluation has taken place, we find ourselves debating similar Regulations designed to improve the supplementary benefits, or national assistance benefits as they are still widely known in the country—designed to come into effect on 7th October of this year. This time, the proposals have to be debated in the context of a Budget which has been very severe, in the context of a statutory wage freeze, and in the context of pretty sharply rising prices.
The Prime Minister said that it was his purpose and one which was shared by the whole House to protect the most vulnerable sections of the community. The Minister of Social Security has said quite rightly that these Regulations are part of the Government's effort to protect the most vulnerable sections of the

community, namely, those living on supplementary benefit, from the full impact of rising prices.
However, this step will cost the taxpayer at least an additional £44 million, and it is right to point out in this debate that the taxpayer's money is being used not to achieve an improvement in the living standards of those living on supplementary benefit but merely to keep pace with the rising cost of living. To adopt the words used by my hon. Friend the Member for Acton (Mr. Kenneth Baker) this additional expenditure of £44 million is merely marking time for those who are in receipt of supplementary benefits.
The cost on the total economy of the country is very substantial. The Parliamentary Secretary said that, according to the last Civil Estimates, the total cost of the supplementary benefits scheme was £394 million. These Regulations increase that burden by a minimum of £44 million. Even with this increase it is probable that, by the end of the year when the increases have been implemented, the purchasing power of the supplementary benefits will be less than it was in October, 1967.
I will not repeat the detailed figures advanced by the Parliamentary Secretary or those given by my hon. Friend the Member for Chelsea. In broad terms, the proposals are to increase the benefit for a single person by 5s. a week and for a married couple by 8s. a week. According to our calculations, they represent an increase of 5·8 per cent.
Unfortunately, I have not had a great deal of time to check the figures required for this debate. Yesterday, I was ploughing my way through the floods in the West Country trying to return to the House. However, I believe I can confirm the figures given by my hon. Friend the Member for Acton that between October of last year, when the rates of benefit were last increased and May of this year, the Index of Retail Prices has risen by 4·3 per cent. Food prices lie at the very heart of the daily budget of families of the lowest income scales, and they have risen by 5·6 per cent between October, 1967, and May of this year.
The Government have told us that during the present calendar year they expect, as a consequence of devaluation


and the Budget, that prices will increase by 5 per cent.

Mr. Roy Roebuck: I sympathise with the noble Lord on recently emerging from the Flood, but his argument seems rather antediluvian. I do not: understand this part of the hon. Gentleman's argument when he talks about rising prices. Is the hon. Gentleman saying that the proposed increases are not high enough? Are the Opposition advocating higher increases? If that is so, can the hon. Gentleman relate that to his argument about marking time? My recollection of the period when the Conservative Party was in office is that there was not even any marking time. The standard of living of the pensioner went clown and down, and all we got was the insulting observation of the right hon. Member for Kinross and West Perthshire (Sir Alec Douglas-Home).

Mr. Speaker: Order. This is a very long intervention and it is rather too wide.

Lord Balniel: The hon. Member for Harrow, East (Mr. Roebuck) says that my argument is antediluvian. The hon. Gentleman's interruption is premature, because this is one of the points to which I shall be referring in my speech. Not only was the hon. Gentleman's interruption lengthy and premature; it was factually mistaken.
During the post-war period average earnings have risen by about three times and supplementary benefits have risen by about three and a half times. I can assure the hon. Gentleman, if it will satisfy him, that this was one of the arguments to which I was going to refer in my remarks.
I now turn to one or two broad aspects concerning these Regulations. As we so rarely have this opportunity in the House, I think it is right that we should pay a tribute to the excellent work which is done by the officers of the Supplementary Benefits Commission. My hon. Friend the Member for Liverpool, Gars-ton (Mr. Fortescue) said that their task was heroic. Few of us would like to undertake the extremely difficult task they fulfil of assessing whether a person is making a real effort to find employment; whether he has merely temporarily found that life has become too much for

him; whether he has some kind of personality weakness, or is just work shy. I think that one must also say that the change in people's attitude to the old National Assistance Board and to the present Supplementary Benefits Commission is due infinitely more to the way in which the officers of the Commission conduct their business, inquiries, interviews and visits than to the legislation which we in this House try to pass.
None the less, when we look at the legislation on this subject which has been passed by this House it is imbued with a humanity of purpose which I find very impressive. There has been a fine impulse in all Governments, of whatever political complexion, to try to raise the living standards of the poorest in the community. In the long trend of postwar efforts to try to help the poorest in our community, the level of supplementary benefits, as I pointed out to the hon. Member for Harrow, East, has risen faster than the rise in earnings and the rise in prices. Although I cannot prove it statistically, I think, as my hon. Friend the Member for Chelsea said, the level of supplementary benefits has in particular risen substantially faster than the rise in the earnings of the lowest wage earners.
The very generosity of purpose of this House has highlighted a problem concerning the lowest wage earners with several children. During a time of statutory wage freeze, combined with rising prices and rising supplementary benefits under these and previous regulations, this problem will be seen to be becoming increasingly acute. Despite the increase in the amount of family allowances, there are about 200,000 or 250,000 children living in families where the bread winner's income is below supplementary benefit levels because of low wages. When the supplementary benefit goes up on 7th October this year the number of families in employment living below the minimum level laid down by Parliament as compatible with a civilised society will increase.
I do not want to ask the right hon. Lady a large number of questions at the end of the debate, but I wonder whether she will find it possible to tell us how many children she expects will be living below supplementary benefit level when the new benefits come into operation in


October as against the figure of 200,000 or 250,000 today.
The overall result of this generous impulse to try to help the poorest sections in our community is surely twofold. First, there is the undeniable fact that there are a number of families living below this minimum standard which we regard as acceptable. Secondly, for those who are on the lower and, indeed, the lowest wage levels, there is in financial terms a decreasing incentive to work. If they become unemployed they will get the same amount of money from the Supplementary Benefits Commission. Because of the wage stop of course they cannot get more than they were earning when in employment.
Overwhelmingly—and this is why I resented some of the interjections in the debate—the beneficiaries of the Supplementary Benefits are the chronic sick, the elderly, and the pensioners. But there is increasing resentment by those who are working on low incomes that they do not get as much as some persons who are out of work. Indeed, with my rather large family, especially since the right hon. Member for Sowerby (Mr. Houghton) has spoken, I am almost beginning to feel like a social delinquent because I receive very substantial benefits. But the Government are faced with the really difficult twofold problem of eliminating family poverty and at the same time providing some incentive to work for those at the lowest income levels. The amount of abuse is small as a proportion of the total benefits—but it is real. Incidentally, I think the abuse lies primarily in the sphere of earnings related unemployment benefit and the redundancy payment scheme rather more than in the Supplementary Benefits Commission.
I would be out of order in repeating the argument which I have so frequently advanced for reconstructing the family allowances scheme, but I want to make four brief points. First, I think that there should be a really thorough study of the many and different means tests which are now operating in the country as a whole. I am not suggesting that one form of means test is applicable for all different types of problem, but I have seen it suggested by a most eminent professor in this sphere, Professor Titmus,

that about 1,000 means tests are operating at the moment. There seems to be a strong argument for simplification. Indeed it is long overdue. I hope that the right hon. Lady will find it possible to achieve something along these lines.
Perhaps I might ask the Minister in passing whether it will be possible to give any progress report about her so-called entitlement campaign, whereby she was encouraging people to take the fullest advantages of the welfare benefits available to them. The right hon. Lady said in her letter of June that she would that month be sending out more than 14 million leaflets to call people's attention to the benefits to which they were entitled. I think that it would be interesting to hear what progress has been made. It has served one useful purpose for me personally as I have discovered that some of my children are entitled to free school meals.
Secondly I think that there should be a tightening up of the administration of the Supplementary Benefits Commission to ensure that nobody can continuously turn down jobs on the ground that he would not be working in his normal occupation. On the whole I feel that a tightening up of administration is preferable to the kind of suggestion made in the Report of the National Insurance Advisory Committee on Conditions of Unemployment Benefit for Occupational Pensioners, but this is a matter which we shall have to debate in the future.
Thirdly, I believe that the redundancy payments scheme should be thoroughly examined. There is a widespread feeling that there is a small amount of abuse by both employers and employees, and I should have thought that this was something which could perhaps be referred to the Public Accounts Committee for examination.

Mr. Speaker: Order. The hon. Member must come back to the debate.

Lord Balniel: In deference to your Ruling, Mr. Speaker, I shall immediately do so.

Mr. Molloy: On a point of order. Mr. Speaker, your Ruling makes it difficult for some of us, because the hon. Member for Hertford (Lord Balniel) has made a point which I dispute, and if I tried to refute his argument you would naturally rule me out of order.

Mr. Speaker: That is a classic statement of the reason why nobody should get out of order.

Lord Balniel: It only remains for me to apologise if I have strayed and caused you, Sir, any embarrassment.
Fourthly, the Report of the National Advisory Committee on the Wage Stop, in so far as it referred to supplementary benefits;, suggested that there should be a special review of the position of the disabled. Can the right hon. Lady say whether it is possible for her to initiate such a special review to secure for the disabled the fullest benefit of the supplementary payments which are available?
This Order is a reflection of the rising prices in society. At a cost to the taxpayer of £44 million, it will merely ensure that those in receipt of supplementary benefits are kept at the same standard of life as they were in October, 1967, and in so far as it brings help in that respect, of course we support the Order.

Mr. Roebuck: The noble Lord said that he would tell the House whether he thought that the amounts in the Order were adequate, or whether the Opposition thought they ought to be higher. Perhaps he will tell us that now.

Lord Balniel: I thought my last remarks made it clear that we supported the Order. We think that this sum of money is necessary to compensate for the erosion in the purchasing power of the supplementary benefits which were put up only last year.

12.33 p.m.

The Minister of Social Security (Mrs. Judith Hart): As often happens with a short debate, this has been a good one. We have had a number of short but very much to the point speeches in which the attention of the House has been directed to the relevant points which hon. Members have put forward. I have been asked a number of questions, and perhaps I might deal with one or two of the odd questions which have been asked before I go on to my more general remarks.
The hon. Member for Hertford (Lord Balniel) asked about the review of the position of the disabled in terms of the wage slop. The position is that one

by one discussions will go on between my Ministry and the Department of Employment and Productivity because we have to keep in close step on any new measures which are taken concerning the disabled worker. Progress is being made, and I hope that within a matter of two, three, or four months it will have been possible to have reviewed every case of the disabled in terms of the wage-stop. This is obviously bound to take a good deal of time, and must depend on the pressures on a local office, because it means doing individual work for each case.
I have a Question down to me on Monday about the entitlement campaign, and perhaps I should not anticipate what is to be said then.
On means tests, I think that I have on several public occasions drawn attention to the work that was done—probably the noble Lord was referring to the same piece of work—by Michael Reddin, at the London School of Economics. He produced a paper some months ago which has been published as a Fabian Society pamphlet. He investigated the multiplicity of means tests, and the variation between them in terms of various local authority benefits. In drawing attention to the work which has been done, I have been indicating that it seems to me that it would be an extremely good thing if we could work towards something a little more multipurpose, a little more uniform, by way of testing the entitlement of people to all these various benefits, most of which are administered by local authorities and of which obviously they must retain control since it is their money and their schemes, and some of which are administered by Government Departments.
Clearly this is one of the new areas of problems which have recently been identified, and I agree with, the hon. Gentleman that it is useful to draw the attention of the House to the fact that here is a problem which is not incapable of solution, but on which clearly a great deal of complex work will be needed to arrive at a solution.
I turn, now, to some of the more general points which were made, and I propose to deal first with the question of the pensioners' index which was mentioned by the hon. Member for Chelsea


(Mr. Worsley). I think that the hon. Gentleman knows—and I cannot today add to what was said—that my right hon. Friend the First Secretary, in accepting the Cost of Living Advisory Committee's Report, said the other day:
The Government accept the Committee's recommendations and steps will be taken to implement them as soon as this can be done. The detailed study of the technical problems of compiling reliable price indices for regions is beginning immediately."—[OFFICIAL REPORT, 10th July, 1968; Vol. 768, c. 109.]
That answers one of the hon. Gentleman's points about the cost-of-living index for pensioners. As soon as this can be done it will be carried out.
This bears closely on the work of my Department. It bears closely on my need to take full account of the particular problems of pensioners as distinct from those of the population in general. In so far as this is relevant to the debate, I think I should point out that the particular difference which was noted by the Cost-of-Living Advisory Committee between the cost-of-living for the population as a whole and the cost-of-living for pensioners was the bearing which housing costs had in this respect. The important point to note is that the pensioner index minus the element of housing diverged only half as much from the general index as did the pensioners' costs including housing.
The relevance of that to this debate is that where supplementary benefit rates are concerned this index figure minus housing is appropriate because rent and other housing costs are allowed for separately in the assessment of supplementary benefit. Therefore, a pensioner who is on supplementary benefit has account taken of this major element which seems to differentiate a pensioner's index from the index relating to the population as a whole. Therefore, we need not worry that, in terms of supplementary benefit, we are not already taking pretty good account of most of the points which emerged from the survey conducted by the Cost-of-Living Advisory Committee. This is not necessarily the case for those who are not receiving supplementary pensions or benefits.
I turn, now, to the cost of the proposals. I was asked by the hon. Member

for Chelsea whether I could give some estimate of the additional costs which would arise as a result of new claims to benefit following the increase in the level of benefit. It is not possible to answer that question. We cannot say exactly how many will be brought within the scope of the scheme as a result of the increases nor the proportion of those who will make a claim. All that one can say is that since the amounts to which they will be entitled will be small, the additional cost as a result of extra claims cannot be expected to be substantial.
I was asked by an hon. Member opposite what cost this represents to the nation. In terms of public expenditure, this uprating in supplementary benefit does not involve an increase in public expenditure as it is measured because of the constant price element which is involved in public expenditure. The supplementary benefit uprating next autumn is being made solely to compensate for rising prices.
Therefore, although in money terms the cost is about £44 million, since all this sum is to enable the rates to keep in line with prices none of it counts as an increase in public expenditure at constant prices. I know that that point is apt to be somewhat confusing to those who are less familiar with the intricacies of the financing of social security.
The relationship with price increases has been one of the main themes of the debate. As my hon. Friend the Joint Parliamentary Secretary said, the main increases which are proposed represent increases of just under 6 per cent., as the noble Lord also said. In saying that, however, one does not convey the full extent of the increase because of the special needs of which account is being taken outside the basic increase in rates. The main factor here is the increase in the long-term addition from 9s. to 10s. In the majority of cases, this will produce an increase of 6s. for the single householder, or about 6·3 per cent. more than the existing rate of benefit, including the long-term addition. For most, therefore, the increase will be 6 per cent. or above.
As to the relationship between the increase and the increase in prices between October of last year and May of this year —the noble Lord was quite right in the


figures he quoted—the index of retail prices increased by about 4·6 per cent., not including housing; but housing is taken account of separately in supplementary benefit.
The most recent detailed statement on the kind of price changes that we can expect was made by my right hon. Friend the First Secretary, in May, when she said that during the coming year we face a 3 per cent. increase in prices due to devaluation and a 2 per cent. increase due to the increase in nationalised industry prices and in Budget taxes. Some of those increases have already taken place and we need not necessarily expect the rate of growth in costs to be as high between now and October, when the new rates come into operation, as during the last two or three months.
For example, the increase between the April and May figures in the index of retail prices was only one-tenth of one point, so that the rate of increases in prices is not necessarily an even one, and we have borne a considerable part of the load of the post-devaluation price increases as imports have begun to work their way through into the shops.
We can fairly say that the increase in rates which we are now putting before the House will truly allow the most vulnerable among those who are entitled to supplementary benefit to have their standard of living kept up to the level of October, or soon after October, of last year. As some of my hon. Friends have pointed out, that level—and I know that hon. Members opposite welcome this just as much as we do—represented an increase in the real value of supplementary benefit, as well as other pensions and allowances, including some of those which it would be out of order for me to discuss but which an hon. Member opposite mentioned.
All National Insurance and supplementary benefits rose in real value by 20 per cent. between October, 1964 and October, 1967. We therefore rest on a firm footing of having substantially increased in real terms the standard of living of those whom we now seek to protect.
The hon. Member for Acton (Mr. Kenneth Baker) referred to rates for the blind. There is, of course, a long history of a difference between rates for

the blind and those for other beneficiaries. At various points in that long history, sincere attempts have been made to express the compassion of the nation for the particular groups of blind people whom we try to help. One ought, however, to point out that at this stage, in relation to the present increase, there are factors which should be taken into account and set against the fact that there is no special increase in the rates for the blind on this occasion.
The majority of blind people who receive supplementary benefit are over pension age. Together with other long-term recipients, they qualify for the long-term addition of 9s. a week, now to become 10s. That addition is to meet special expenses. The current rate of difference of 24s. 6d. is itself for special expenses arising from blindness. Therefore, the great majority of blind people at present have a substantial margin— now standing at 33s. 6d., and to be increased by the Is. increase in the special long-term addition to 34s. 6d.—above the basic scale to meet their special needs.
The blind have one additional preference. If blind householders have, for example, an adult working son living with them, the rent allowance which is added to their basic needs is not reduced by the non-dependant's share of the rent. This is a special privilege which the blind have.

Mr. Kenneth Baker: I was not arguing for a special extra increase for the blind. I was asking that they should receive the same rate of increase as the non-blind under the Regulations. The non-blind get an increase of about 5·8 per cent., whereas the blind get only about 4·4 per cent. This seems to me to be an unfair anomaly.

Mrs. Hart: In all these matters I take account of the detailed thought that is given by the Supplementary Benefits Commission to the special problems of particular groups. Any decision about making an increase in the rates of supplementary benefit is a matter for me as Minister, but the Supplementary Benefits Commission has full responsibility to advise me on how effect should be given to increases in the rates. The Commission and I have, of course, taken into account the special preferences


which I have indicated. As, in the past, there have been a number of occasions on which special attention has been given to the blind, we do not on this occasion propose the kind of increases for the blind that the hon. Member suggests.
The noble Lord asked whether I could estimate how many children were likely still to be living below the level of supplementary benefit when the rates of both supplementary benefit and family allowances are increased in October. The House will note that on this occasion family allowances and supplementary benefits are being increased at exactly the same time. We can, therefore, hope on this occasion to minimise the awkwardnesses which arise when one rate goes up and account of that has to be taken in some other benefit.
I cannot give the noble Lord the figure that he asked for. I have explained in the past why all I could do is to quote the figure as we knew it from the Family Circumstances Survey. I hope that some of the further research that we are planning will enable us to have more up-to-date information, but at the moment I could only quote the figure in that survey, which is now two years old, and say that the factors affecting numbers are so variable that one cannot possibly make an estimate that takes all of them simultaneously into account.
As a man's wage rises, he gets out of the poverty group. On the other hand, if his rent is increased he is pushed down again. There are so many different factors that reliable estimates are not possible. This means that it is always a little dangerous to make assumptions about numbers. So if one cannot reliably estimate it is probably wiser not to make assumptions. I prefer to refer back to the survey and say that I cannot tell hon. Members more than that, but that all these things will have had an effect.
I turn to one of the basic themes that have arisen in the debate—the question of the minority who are abusing social security. I agree with the emphasis which has throughout the debate been placed on the fact that when we talk about abuse of the social security system we are talking about an extremely tiny

minority. Indeed, I think that hon. Members on both sides of the House are so much aware of the problem that there is a real understanding of their nature. However, one of the difficulties is that our understanding in the House is not shared sufficiently by people outside. One of our tasks on both sides in protecting the social security system, of which both sides have a right to feel proud, is to extend to people outside the House our own knowledge of the nature of the problem and of the right-ness of what has been done in increasing the standard of living of the poorest in our society. One would particularly wish that the Press, which avidly focuses attention on any single case that it hears about, would a little more responsibly carry out the task of informing people about the nature of the problem.
As I say, this concerns a tiny minority. It is a minority generally to be found more among the 20 to 45-year-olds than among the 45-year-olds and over. It is to be found more among people who have never experienced the kind of hardship that older people knew. It is found among a group of people who, because they have not participated in the fight for better social security conditions so fully, are less inclined to have a pride in them. It is often found, as I said in an intervention to my hon. Friend the Member for Croydon, South (Mr. Win-nick), among middle-class youngsters who ought to know better, youngsters who have public school education, youngsters who sometimes have part or whole university education. This very small element of the problem is confined mainly to London.
Outside London the problem arises largely among the unskilled rather than the skilled. To this extent, I would quarrel a little with what the noble Lord said about the rôle of earnings-related supplements in this, because the people who benefit from such supplements tend to be the more skilled workers. The low earner derives comparatively little benefit from the supplement, and the unskilled man tends to be a low earner. Therefore, I dispute that this is one of the main elements in the problem of the workshy.

Lord Balniel: Would the right hon. Lady explain one thing? With regard to


the higher income groups in receipt of earnings related unemployment benefit, can she explain to the House the logic —I am sure that there is a logic in it, but I do not understand it—of taxing a widow's pension or a retirement pension, but not taxing the earnings related unemployment benefit, which can reach very high levels for periods of six months?

Mrs. Hart: The logic is to be found in the general context of the splendid logic of our whole taxation system. But it is the unskilled worker who is mainly finding a disincentive to work as a result of the increase in the levels of supplementary benefits which are paid. This raises two questions. It raises a question to which my answer, and I think the answer of the whole House, is clear. Have we been right to raise out of poverty many people who up to three or four years ago were living in poverty? Have we been right to improve the standard that we regard as being the minimum for a family where a man is sick or where a man and his wife are old? Have we been wrong to seek to increase that standard of living?

Mr. Molloy: I should like to make a point before my right hon. Friend leaves the subject that she is now talking about. There is this range of people—they are a tiny minority—who are cheats. But this defect in personal make-up is at the other end of the scale, as well. I remind her that one of her colleagues had to introduce legislation to deal with those who cheat with their Income Tax returns. It was no mean figure. It was so large that it would have paid for what we are discussing under these Regulations.

Mrs. Hart: My hon. Friend is quite right. But one of the suggestions that seems to emerge from many of the Press discussions of the problem is that we may have been wrong in raising the minimum levels that the State is prepared to guarantee to those who are old, sick or unemployed through no fault of their own and the vast majority of those who rely upon the State in adversity for the protection of their standard of living. I am sure that the whole House would totally reject the concept that it is anything but completely right to seek to do this and that as the standard of living of the rest of us advances we should seek to carry with us

the standard of living of those who need our protection.
I think that in nearly every debate that we have had about social security, whether about family allowances or supplementary benefits, I have emphasised that the real trouble goes back in the end to the fact that there are still some people, a small group, who earn lower wages than the level of supplementary benefit that is paid. This is our problem of child poverty. It means that one must identify the groups in poverty —the disabled, the partly disabled, the man who cannot hold down a steady job at a high enough wage because of a chronic ulcer or a weak heart, the genuinely socially maladjusted, the people with some real mental or psychiatric difficulty which means that we have to extend to them sympathy, help and consideration.
We have to look at the incomes policy. In its income policy, the Government have made it clear that we have to give special consideration to the needs of lower-paid workers. Every time a wage agreement is negotiated between a trade union and an employer which gives a marginally extra increase, a higher proportionate increase, to the lowest paid than to the better paid, to that extent a real contribution is being made to solving the problem of poverty and the problem of abuse.
Of course, it is correct that the field in which we can try to check this tiny minority of abuse is in administration, and I want to make a very important point here. The hon. Member for Hertford paid tribute to the work of the staff of the Ministry. He is right in saying how crucial, in persuading people to take advantage of the supplementary benefits and other benefits available to them, has been the rôle of the staff in terms of their ability to create a good and sympathetic relationship with those who come to them for help.
I am sure that the hon. Gentleman also knows what a tremendous task the staff of the Ministry has carried out over the last two or three years in introducing the new measures which have enabled the Government to assist those in our society who need our help. Of course, if one is to track down and do something about the odd case where it is thought that someone is committing abuse, this


demands the individual attention of an individual member of my staff because that is what using administrative methods means.
I hope soon to indicate one or two respects in which the administrative measures we use may be slightly changed in order to allow my staff to be able to deal more effectively with the cases they know about and have identified, but in terms of the numbers they represent it is a very delicate balance that we have to achieve here. The House is aware of it and I wish that the country were as much aware of it.
One single case of abuse in a whole housing scheme can be known to everybody in that scheme, talked over many times, go round in circles and come back with changes in the story. One knows that in people's minds there is doubt about our whole system. This is why the Ministry tries extremely hard to get to grips with those it can identify as abusing it. But it is equally true that, when a man is seen walking down the street having just claimed supplementary benefit, and looking fit and healthy, someone says, "There is a man who should be at work." They may not know his medical history, that perhaps he has only recently ended treatment in a psychiatric hospital. They cannot make judgments merely by what they see.
One of the outstanding qualities of the staff—and it is one which never ceases to amaze me—is the way in which they are able unerringly to distinguish between the man to whom sympathy and help and understanding should be extended and the one who is trying to get away with something. But it is important to emphasise that many who seem to be workshy may merit our sympathy instead. I refer now to the Daily Mail article earlier this week because it represents an interesting example of the perfectly genuine misunderstandings which can sometimes arise.
The article was, to begin with, as far as I can gather, a collection of cases which were mainly drawn from previous Press reports. They were not cases suddenly discovered. They were old Press cuttings dug out of the file. We have been able to track down the origin of a few of them. For example,

there is the case of Mr. X, as the article referred to him. The article said of him:
Consultant Mr. X sold his £10,000 house and moved into a luxury flat. He organises management advice for fees. His wife has her part-time job. Mr. X also draws Social Security supplementary benefits. In other words, he is on National Assistance.
I may point out, in passing, that, of course, Mr. X is not on National Assistance. He is receiving supplementary benefit.
My officers who have seen him say that he is a very sick man, suffering from coronary thrombosis, that his business showed no trading activity for the year to which the report refers and that it was totally stagnant mainly because of his health and partly because the business had not been doing very well. The house was certainly sold for £10,000, but the proceeds were used to clear the outstanding mortgage and to buy his present smaller flat, on which the outgoings are not allowed in full in the payments he gets from supplementary benefit. This presents a rather different pattern.
In case No. 1 in the Daily Mail article, the facts are that he has been receiving supplementary benefit only since January this year. He retired in 1961 and from then until January, 1968 was living on his savings. He has now exhausted most of his savings and is on supplementary benefit. That, again, is a somewhat different picture from that presented by the Daily Mail. There are others. Case No. 4 is the one where, according to the Daily Mail, a former cinema worker, unemployed for eight years, draws more than £14 a week from the State. The article said:
When it was suggested he should turn in his rented TV to help pay his debts, he said: 'I can't do that the doctor said I should have TV to relax my mind'.
Supplementary benefit is not now in payment to this man, despite what the article implies, because, since the report was published, he has died. The article did not bring out the fact that he was unable to work because he was very sick and that sickness benefit was in payment. The suggestion about the T.V. set was made by a judge when the man was brought before the court for non-payment of a debt. These are different pictures from those presented by the Daily Mail.
Case No. 5 was that of a Greek born man who drew £8 a week for five years. The article said:
He said he was paying 50s. a week rent, had no assets or income and was in dire need. In fact he owned two houses and a restaurant —and was guarantor for a £4,000 bank loan to his daughter. He was jailed for three years.
This, of course, was an elaborate and deliberate fraud. The man represented that he had no source of income. But the point is that the fraud was detected, the man was convicted and he went to prison for three years.
Indeed, during the last three years, as a result of deliberate efforts the Ministry takes to prosecute fraud cases, 451 men were prosecuted for remaining deliberately without a job when they could have got one. We have about 60 officers throughout the country who specialise in dealing with this kind of abuse. I believe that a very effective job in many areas is already being done.
I have tried to get the balance right. It is a difficult one to achieve. I am worried about the tiny minority who are cheaters. I am equally concerned that the public should know that there are many whom they think to be cheaters who deserve their sympathy instead. It is important that this very delicate balance should be kept in the task of looking after those who merit our sympathy and in chasing up the cheaters who do not merit it. On the latter point, I believe that it is important that the Ministry should, through administrative action, take all steps it can to further the effectiveness of the measures which already exist. That

is the right balance. Having emphasised the need to get the balance right, I am prepared to believe that many Press reports which appear will not get the balance right.
We all find it extremely difficult to discuss this issue in terms which are clearly understandable and simple to the general public. I come back to the essential basic problem of low wages. To the extent that we can end the low wage problem, we end the temptation and incentive to cheat in social security. But in asking the House to approve these Regulations, I am grateful for the highly intelligent and informed comment throughout the debate. Somewhat academic as we may have been, we have been talking about the extent to which we can extend compassion to those in our society who demand it of us.
We are talking about old people in front of their firesides this winter; we are talking about people who are trying to bring up families when the husband is a chronically sick man; we are talking about wives who have been deserted; we are talking about unmarried mothers; we are talking about all those groups who, through no fault of their own, are in adversity and whom the House has always sought to help and whom again it is seeking to help today.

Question put and agreed to.

Resolved,
That the Supplementary Benefit (Determination of Requirements) Regulations 1968, a draft of which was laid before this House on 18th June, be approved.

BRITISH STEEL CORPORATION (BORROWING POWERS)

1.11 p.m.

The Parliamentary Secretary to the Ministry of Power (Mr. Reginald Freeson): I beg to move,
That section 19(4) of the Iron and Steel Act 1967 shall have effect with the substitution for the reference therein to £300,000,000 of a reference to £400,000,000.
I must first give the apologies of my right hon. Friend the Minister for not being able to be present at the opening of the debate. I trust that hon. Members will understand the reason for his not being here. He will be here as soon as he can return to the Chamber.
Although the Motion is purely financial, it is customary and right for the Minister who is asking Parliament to authorise a nationalised industry to increase its borrowings to give a general review of its progress and prospects. Since the last general debate on steel, in January, last year, we have seen the establishment of the British Steel Corporation, the act of vesting, the publication of the Corporation's first report on organisation and the first months of this new nationalised industry. Commendable progress has been made in difficult conditions, and I should like to pay tribute personally and on behalf of my right hon. Friend to all who have made it possible. Notably, I should like to emphasise the part played by the Chairman, the noble Lord, Lord Melchett, now happily recovered from his recent illness and again leading the industry forward, and his Deputy Chairman, Mr. Michael Milne-Watson, and their colleagues.
In moving the Third Reading of the Iron and Steel Bill, my right hon. Friend who is now the Minister of Transport gave a warning that the world surplus of capacity created deep difficulties for the steel industry not only in this country, but throughout the world. This warning has been amply justified by the events which have followed since. In the United Kingdom last year, output and capacity utilisation fell while imports rose. Financial results were correspondingly depressed. In the year ending September, 1967, the companies forming the Corporation made a loss after deprecia-

tion of £10 million and achieved a return on capital of under 2½ per cent.

Mr. Deputy Speaker (Mr. Sydney Irving): The hon. Gentleman is getting very wide of the Order. He ought to confine his remarks to the £100 million with which the Order is concerned.

Mr. Patrick Jenkin: On a point of order. I believe that it has been accepted for many years that an Order increasing the borrowing limits of nationalised industry should provide the House with an opportunity to examine the results of the policy of the industry. I hope, Mr. Deputy Speaker, that in your Ruling to the Parliamentary Secretary you were not seeking to impose any unreasonable restrictions on our right to discuss matters of general interest affecting the British Steel Corporation.

Mr. Deputy Speaker: It is true that on coal there has been a widening of the rule about discussion of the industry, wider than that concerned with the Order itself, but the precedent is not clearly established and it would be better if the Minister and other hon. Members endeavoured to relate their remarks to the Motion. With a little skill hon. Members ought to be able to say most of the things they want to say by relating them to the Order.

Mr. Freeson: Thank you for that helpful advice, Mr. Deputy Speaker. I have one or two more general background observations to make by way of introduction and I hope that you will agree that, however wide ranging the rest of my remarks may be, they will be put in such a way as to explain the background to the Order.
I was about to say that there are now signs, fortunately, of improvement. Steel production this year should be much higher than in 1967, and capacity utilisation has risen sharply. As the House knows, output is now at a near record level, about 8 per cent. up on last year. In the six months ending 31st March, 1968, the Corporation approximately broke even after interest on borrowings and depreciation, but before interest on commencing capital debt, on which I shall have something to say later.
The Corporation faced an immensely difficult task. It is well known that the


merging of even two companies is a formidable operation. The Corporation has had to bring about a merger of 14 large companies with some 200 subsidiaries at home and abroad, creating one of the largest industrial concerns in the world. It has had to create from scratch a headquarters organisation to manage this large concern, and it has had to do all this against a tremendously difficult background.
There has been rapid progress in organisation. The first stage was to prepare for vesting and this took place only four months after Royal Assent, the shortest period for any major nationalised industry. The second stage was the submission of the Corporation's first report on organisation. This was required within a year of vesting; in fact, it was submitted within three days, and has since started to be implemented progressively.
The building up of the necessary headquarters staff has gone ahead and new offices and specialised planning staff are included in the headquarters organisation. The full-time directors of the group boards were appointed by the Corporation at the end of September last year, and the part-time members in April, this year. It is of noteworthy interest that the latter appointments include the employee directors, an imaginative experiment initiated by the Corporation itself which we will all watch with interest, including industrial management and the trade unions. I am very glad to see my hon. Friend the Member for Sheffield, Brightside (Mr. Eddie Griffiths), who was an employee director, in his place here today.
The British Iron and Steel Federation was dissolved on 31st October, so quietly that its passing went almost unnoticed, and the central trading companies were transferred to the Corporation. The speedy success of these complicated negotiations is a tribute to the good sense of the leaders of the Federation in realising that nationalisation had now come to stay, and, above all, to the skill and drive of the Corporation's negotiating team.
This is a record of solid achievement, but the success of nationalisation will depend not just on organisational changes, but rather on the Corporation's

success in evolving policies necessary to meet the problems of the 1970s.
There is no easy way out of the difficulties facing the Corporation. World steel prices remain low and the world surplus of capacity will remain large for a long time. Steel industries overseas are continuing to reorganise themselves so as to cope more effectively with these conditions. For example, within the last few weeks there has been a proposal for the merger of the two largest Japanese companies, which would create a new giant as big as the Corporation.
All this emphasises the need for the reorganisation of our industry, so that it can face the tasks ahead. This is the task on which the Corporation is now starting and I would like to review the position briefly under three main heads.
First, planning. The Corporation expects to have by the end of this year a second report on organisation, which will be concerned among other things with the question whether the companies should be retained or abolished; and with the further arrangements which should be made to ensure that the resources of the Corporation as a whole are utilised to the best advantage. Successful long term planning will be one of the keys to the success of nationalisation. The Corporation will therefore also be working continuously on planning the future development of the industry, on which it will keep in close touch with the interests involved including consumer industries, trade unions, regional authorities, and of course the Government, who will keep Parliament informed. We hope that the Corporation will have a broad brush picture of the future development of the industry within about a year from now.
If the industry is to be lean and efficient—as it must eventually be to compete in today's international steel market—a substantial reduction in manpower is inevitable. But that reduction must be carried through humanely— and the Corporation intends to have full regard for the social consequences, and to act in full consultation with the unions and with the Government who are of course concerned with the overall regional implications.
Last summer the Corporation put proposals to the unions for changes in the


industry's negotiating and joint consultative machinery and in May it put proposals for a national agreement on wages and productivity which would clear the way for local bargains to increase productivity and secure a substantial share of the benefit for the workers. This is a difficult area and we must expect some tough negotiations. But with goodwill on both sides I am sure that any difficulties can be overcome and a big increase in productivity obtained.
A correct price policy is fundamental to the Corporation's success and to the health of the national economy. This is an area where a basic review is of prime importance. That review is now taking place. It is not just concerned with levels of prices, or the detailed structure of the steel industry's complex price schedules, but with the most fundamental questions. The Corporation hopes that the result of this wide-ranging review will be available for discussion with the Government by the end of this year.
There are short-term improvements, because the Corporation is, of course, not concentrating on long-term policy at the expense of short-term policies which can improve its efficiency, and financial position. It has, for example, made arrangements for central financial control which will result in valuable savings—control of capital expenditure, banking and credit arrangements and investment in working capital.
Detailed technical and cost comparisons are now being organised between the different works in the nationalised industry, and will help to bring all to the standard of the best, with large prospective cost savings. Competition in export markets between the nationalised companies—the only result of which was to reduce the prices the British industry earned—is being controlled and in some cases eliminated. Weak points in the industry's management structure are being strengthened.
I turn now to the case for increasing the borrowing powers of the Corporation from £300 million to £400 million as proposed in the Motion.
At the end of March the Corporation had already borrowed £252 million. My right hon. Friend has given authority for further bank borrowings of £45 million.

It has now effectively reached the £300 million limit.
As one of the largest commercial organisations in the world, the Corporation necessarily has a large requirement for temporary finance, and in order to provide adequate short-term finance and to enable it to meet its obligations to repay certain outstanding loans about a further £70 million is now needed. The Corporation has already negotiated, with my right hon. Friend's permission, a further short-term facility of £30 million with the Banks. The extension of the borrowing powers will enable it to take up facilities such as these.
I should emphasise that on current estimates the Corporation is generating the funds it needs for the operation of the industry, except for the repayment of borrowings and any interest on the commencing capital debt.
The House will wish to know why the present limit of £300 million has been reached so quickly after vesting date when the Government had stated earlier in Committee that it should last for about three years. It was of course made clear at the time that this could be no more than a rough estimate on account of uncertainties both as to the future trading situation of the steel industry and as to the timing of vesting. This was a point particularly made by my predecessor, the present Joint Parliamentary Secretary to the Ministry of Technology.

Mr. Patrick Jenkin: Can the hon. Gentleman refer the House to the passage where the Joint Parliamentary Secretary said that this was merely a rough estimate?

Mr. Freeson: I am not sure if I have a margin note of the column number. It was 6th December, 1966. Perhaps the hon. Member could look up the column.

Mr. Jenkin: Perhaps it would help if I indicated that what the Parliamentary Secretary said on 6th December at c. 1927 was:
First of all, the total borrowing powers relate to a five-year period and the lower sum of £300 million would, we hope, be adequate for a three-year period."—[OFFICIAL REPORT, Standing Committee D 6th December, 1966; c. 1927.]

Mr. Freeson: Without having the actual text in front of me, I think that


the hon. Gentleman will find that if he reads the passage more fully it is in the context of the words "a rough estimate" which I have used a little earlier.
The main elements of this extra £100 million are:

(a) Funding of companies' bank overdrafts, trade bills and acceptance credits—£94 million extra; and
(b) The fact that the companies made a net loss in 1966–67 and could not, therefore, finance the terminal dividends of £33 million; offset by
(c) a saving of £23 million by which we had over-estimated the amount of Finance Corporation for Industry loans outstanding at vesting date.

The House will therefore see that the bulk of the additional commitments represents the funding of the companies' existing debts, which of course does not represent a new capital inflow, but only a change in the method of financing the existing debt of the industry, which is an inheritance from the privately-owned companies.
I want now to say a word about the terms of the commencing capital debt. As I have said, the Corporation took over the industry at a time of falling demand and of weakness in the international steel market. It was known that the early period of the Corporation would be a difficult one financially, and this was confirmed by the results for the publicly-owned companies for the year ended September, 1967, representing largely the position which the Corporation inherited. Ten months of that year represents ten months of pre-nationalisation.
Because of these factors, the Corporation is not at present earning the revenue needed to pay the normal interest charges on the commencing capital debt and my right hon. Friend has therefore had to consider how he should discharge his responsibilities under Section 18(2) of the Iron and Steel Act, 1967, which requires him to determine, with the approval of the Treasury, the rate of interest and other conditions which should attach to the debt.
The House will probably recall that the Corporation has announced its intention to put forward proposals for a substantial part of its capital to be con-

verted into equity in the form of public dividend capital. Anything on these lines would, of course, involve specific legislation, but, so that my right hon. Friend may consider its proposals, he has asked the Corporation, entirely without commitment, to present him with a statement of its long term plans and a forecast of its revenues. In these circumstances, it seems to him only sensible to await the Corporation's long term plans and revenue forecast before proceeding to a determination of the terms of its debt.
The Corporation, at his request, is pressing forward with its plans and submissions and it is his intention to make his determination as soon as possible after they are received, but this can hardly be before the beginning of 1969. Meantime, as the House knows, the Corporation has paid £20 million generally on account.
Inevitably, this has been something of an interim report. Great progress has been made, but a great deal more remains to be done. But one thing I think is clear beyond all reasonable argument: The British steel industry now has an organisation with the potential to face and overcome the problems of the 1970s, and to compete successfully in this tough international market. It is in the knowledge that this is so that I confidently ask the House to pass the Motion.

1.31 p.m.

Mr. David Lane: In the normal Parliamentary sense I have no interest to declare, because it is some years since I ceased to work for the British Iron and Steel Federation. In another sense, I have a continuing interest in the industry, because anyone who has ever worked in it in any capacity must remain sympathetically concerned with the fortunes of the industry and of the men who work in it.
In addition to the tribute which the Parliamentary Secretary rightly paid to the leaders of the Corporation for all they have done in the last few months, I think that it is right that we should pay tribute to the men at all levels in the industry who, for the past 20 years, have never been free from political controversy and have managed to stick to their job and, in my view, have achieved


something of an economic miracle in what the industry has done since the war.
In effect, we are considering an amendment to Section 19 of the 1967 Act. I still believe that it is a thousand pities that the Government were determined on a second nationalisation and the abandonment of the previous structure under the 1953 Act.
It seems that we have no alternative but to agree with the increase which the Government are proposing, although, as the Parliamentary Secretary admitted, the information on which we are asked to do so is necessarily thin. The advances have been used up much more quickly than forecast and, to my mind, that simply means that we must decide, or others must decide, even more quickly than was the case the major questions which need decision before the Corporation is properly on course. That is what we are debating, and I wish to touch on some of the fields in which these major decisions lie.
It makes me very sad to read in comments of steel being included with other older-established industries—for example, coal and the railways—as industries due for contraction. On the contrary, this is an industry with a future of growth and, I hope, of prosperity if its problems are tackled properly. I remain sceptical about whether they can be tackled properly under nationalisation. I am glad that we are committed as a party to reorganise the industry as may be necessary in the light of experience and that we are also remaining open-minded about the precise form of that reorganisation. For the time being, we must suspend judgment.
But, in the immediate future, major adjustments will have to be made by the industry, and surely the objective must be to reduce to the minimum any obstacles which will make this adjustment harder, whether they be in the form of delays in reaching decisions or of Government policies in various fields directly effecting the industry.
Turning to the fields in which problems lie, I deal first with the financial problem. I am sure that we all welcome the clear statement of the Corporation's basic objective in paragraph 47 of its Report on Organisation last year:

The Corporation regards its basic objective as being the achievement of the maximum long-term return on its capital investment consistent
with various important considerations which must be borne in mind. According to the latest results announced, the return on capital is, if anything, negative if we take account of the interest which should be paid on the commencing capital debt. I am glad that the Parliamentary Secretary said that some decision should be reached by the beginning of 1969 about this capital debt, because I do not think that any problem facing the industry is more important.
I would not necessarily oppose some measure of equity in the capital structure, because I hope that every hon. Member would agree that it would be very helpful to the industry to avoid the great millstone of fixed interest debt which has plagued other industries in the past. But this will be a Government decision, and I hope an urgently taken Government decision, so that the industry can be clear about the capital structure and its financial objectives.
Turning to the question of manpower, morale and productivity, this is an industry with a proud record of labour relations. It is unfortunate that we should be having this debate in the shadow of the dispute between the Corporation and two of the white collar unions. One can only hope that it will soon be settled in consequence of the court of inquiry which has been set up. There is a brighter side—the recent announcement about an important productivity bargain at Port Talbot, which I hope will be the forerunner of other such bargains in this industry and other industries.
If there is to be, as I am sure there must be, some streamlining of the labour force in the works, it is imperative to prevent the growth of bureaucracy at the centre. There are a few disturbing indications of the growth or size of the central body, and this is something which should be watched very carefully because we all know the bad effects on morale of growth at the centre while there is pressure for contraction in numbers of men on the job. I hope that we shall hear more about this in the next report of the Corporation.
I should like to say a few words about market prospects on which the Parliamentary Secretary touched. The current


world surplus is estimated at about three times the annual capacity of the British steel industry. I am sorry that we have not heard more about this problem; perhaps the Minister will say something about it. The Government can help in two important ways: first, in the promptness of the anti-dumping measures which may be necessary, and, secondly, in trying to get more progress in the very crucial international discussions which have been going on for far too long with far too little result. Plainly, if there can be negotiated internationally some soil of self-denying ordinance for the world's steel markets, this will make the task of the British industry's adjustment very much easier. I was sorry that only on Tuesday the Parliamentary Secretary, at Question Time, was still not able to announce any progress in these international talks.
Meanwhile, on the price structure in the home market, as we have been told, a review is in progress, and I am glad to hear that the results of it may be available by the end of the year. I hope that in making the review the Corporation will bear in mind the need to reassure the private sector of the fairness of the future price arrangements in the public sector, because although the private sector represents only about 10 per cent. of the volume of output, it accounts for nearly 30 per cent. of the value. I hope that the Corporation will also bear in mind the need for whatever new price arrangements are made to be as nearly as possible consistent with arrangements in the Common Market, in the hope that eventually this country will join the Common Market. I am sorry that, as it seems, two or three years ago an opportunity to move in this direction was lost. I trust that this new opportunity will be taken.
In turning to modernisation, costs and efficiency, I will deal first with capital investment and capital cost. The Times this morning has a bold front-page headline,
Steel industry to be rebuilt".
That is fine, but one is bound to look at this with a certain amount of caution in view of some of the figures given in the article. The mention of 20 million tons of new capacity by 1975, which I calculate to be an average of 2½ million tons capacity each year until then, repre-

sents an enormous figure in terms of finance.
I hope that the experience of other nationalised industries will be remembered when they have embarked on enormous capital-expensive programmes and have sometimes found that these have turned into too big a burden of capital cost in the light of later market experience, quite apart from the major problem of finding the money against the competing claims of other industries.

Mr. Frank Hooley (Sheffield Healey): Would not the hon. Member agree that the key consideration is to provide this country with a capacity that will meet all its needs and that that must be the overriding factor?

Mr. Lane: I agree, but we are in a dilemma when to do that ideally on paper involves astronomical sums of money. I only hope that the country can afford it. Let the Corporation bear in mind, as I am sure it will, the admirable sentiment expressed in paragraph 52(d) of its Report that one of the long-term objectives is
To move towards the development of larger production units but with full recognition of the part that efficient small works can play and of all the social implications of any changes.
I hope that we do not go so fast with these vast investments that insufficient use is made of the highly efficient smaller plants which may still be able to play an important part.
My next point concerns the speed of exploiting new developments. According to The Times this morning, the Corporation has been very impressed by the speed with which new developments have been brought into production in Japan. In comparison with that, I have been somewhat disappointed from recent reports about how many years it will yet be before the spray steelmaking process, for example, can be brought into use in this country. I hope that the Minister may be able to say something about this as an example of a new technical process.
On the subject of operating costs, nothing is more important to the steel industry than fuel costs, which represent more than one-fifth of the average cost of steelmaking, leaving aside capital costs. I hope that the Government will


stick to their guns of a cheap fuel policy. In comparison with its competitors, the British steel industry carries heavy burdens—for example, its inability to import cheap coal and the tax on fuel oil—but these things are within the Government's power to put right as soon as may be.
There is scope, too, for more use of natural gas. I hope that in the Government's enthusiasm for a new aluminium smelting industry the steelmakers will not find themselves at an unfair disadvantage in terms of electricity costs as against their competitors in aluminium.
The last field of problems with which I propose to deal concerns what I call the shape of the Corporation and the balance of power within it. I hope that in the next Report we shall hear more about the non-steel activities in which the Corporation engages. Serious thought should be given to the disposal of at least some of these activities, when they are not inherent in the main stream of steelmaking, to enable the Corporation the better to concentrate on its main task and, in some way at least, to ease the big problem of financing future development.
As to the four groups into which the Corporation has organised the industry, I am sure that we all welcome the statement in paragraph 64 of its Report that
The spur of competition, other than in price, between the Groups and between the units below them is in our view highly desirable.
That is fine, but how is this competition to be made a reality? What financial tests will the Corporation apply?
That brings us to the whole question of centralisation versus decentralisation. I believe that in this industry overcentralisation, particularly in selling, would be disastrous. Steel is an industry in which producer-customer relations must be close and, as far as possible, works-orientated. If the Corporation is in doubt, let it err on the side of decentralisation and remember its excellent words in the final paragraph—paragraph 101—of its Report last year:
By means of these systems"—
that is, systems of control—
under which it will encourage initiative at ail levels, the Corporation believes that the

total management effort of its organisation can be harnessed to achieve the objectives set out earlier in this report.
It is the words:
encourage initiative at all levels
which, I hope, will be particularly remembered.
We all acknowledge that the Corporation has got off to a good start and I trust that the momentum will be maintained. I hope that we shall see the next Report, as the Minister also hoped, at latest by about the end of this year. The right hon. Gentleman the Minister can help greatly in getting these problems quickly resolved and the decisions made. He has brought to his new office a briskness of manner, and I hope that we will also have a briskness of decision-making. In other sectors of the Ministry's activities, I have been somewhat disappointed at slowness of decision-making in some recent cases. The steel industry must make important adjustments to the situation which faces it, and to do this it will need the maximum help and encouragement from the Government.
If major decisions are unduly delayed, there is a risk of the industry sliding into the state of depression which is too often characteristic of nationalised industry. The men in steel deserve better than that, and I hope that the Government will do all in their power to help them to achieve the sort of growth and prosperity which we all wish for them.

1.47 p.m.

Mr. Eddie Griffiths: I would like to crave the indulgence of the House for this my maiden speech. For the past three weeks I have been inundated with well-meaning advice about when I should make my maiden speech and how I should deliver it. Some advised me to leave it until after the Recess and others told me to get it done before then. Having listened to all that advice, however, I thought it only fitting that I should pay my humble tribute to the greatest steel city in the world— namely, Sheffield—and also to the works of John Summers and Sons, near Chester, where I spent 16 very happy years. I decided that as a tribute to those two, I would make my modest contribution on the important subject of steel, which I love very much.
One of the things which I have been trying to do in the last few days is to


take stock and wondering how I came to be in the House of Commons. I believe that no man is self-made and that we are all subject to the influences of our colleagues, the way of our upbringing and the localities in which we have been brought up. One of the greatest assets which I have had was to be blessed with a fine Socialist father. He was one of the few truly practising Socialists that it has been my privilege to meet.
When he passed away 12 years ago, I spent the following 12 months trying to examine his life and his philosophy. I realised that he was one of the happiest men I had ever known. The reason for this was that he believed that the philosophy and purpose of life were to give whatever talents we have in the service of our fellow men. That is the main reason why I stood for election and have come to this House, to give whatever talents and abilities I have in the service of my constituency and of my fellow men.
I can do no better than to quote from the Bible a very famous verse which, I would suggest, every Member of Parliament should use as his yardstick to measure the motive of his contribution to any topic:
Though I speak with the tongues of men and of angels, and though I have the gift of prophecy, so that I could remove mountains, and have not love, I am become as sounding brass, or a tinkling cymbal.
I believe that if our actions and our observations are based on respect and love for our fellow men our contributions will be worth while.
I am probably one of the luckiest Members of Parliament in having a constituency known as Brightside. I found this a great comfort to me; for when we have our political ups and downs, and as we talk of swings against or for us, I can always say, "I look on the Brightside". I think that this name typifies the people of the constituency. One of the things I found when I was going round during my election campaign was that the elder people not only saw the difficulties and the problems but they appreciated that, in any human balance sheet there are blessings and advantages.
One of the things I appreciate about this Sheffield constituency is the great warmth of character of the people. In-

deed, I should like as a Welshman to pay tribute to them. I am sorry that there are no Welsh Members now in the Chamber. I think that there is a lesson to be learned here. As a Welshman, I know I have been taken to the heart of the people of Brightside. My experience of life is that people in Brightside, in Caerphilly, in Scotland, are basically the same under the skin: they have the same hopes and fears wherever they may be throughout the length and breadth of this country.
I would like to pay tribute to my predecessor, Dick Winterbottom, who passed away rather prematurely at the age of 68. Dick Winterbottom, I found during my campaign, was a name that was known very well on every doorstep in Brightside. He represented the constituency for 18 years. He moved his home from Oldham and went to live right in the middle of the constituency and he shared the joys and sorrows of his constituents. His door was always open to them so that they could take their problems to him. I was very touched at the great tokens of affection which were shown to him whenever people talked about him. Indeed, more than one said to me, "If you are half the man Dick Winterbottom was you will do all right". I hope to prove more than half the man in due course, but I should like to pay that tribute. Also, when I came here and talked to my hon. Friends I found that they spoke with great affection of him and of his contribution to the work of this Chamber.
I should like to touch on the position in the steel industry prior to nationalisation. The hon. Member for Cambridge (Mr. Lane) suggested that there had been a very high degree of success in private enterprise in the steel industry. I would remind the House that, in those years when the steel bosses were taking considerable profits out of the industry, if one stuck a stamp on anything and called it steel one could sell it—up to about five years ago. I believe the hon. Member is misleading the House and misleading himself in feeling that private enterprise in the steel industry could cope with the present situation in the world market. Indeed, if we look at the position from the middle 1950s to date, we shall find that because of the negligence of the private steel companies the


price advantage which we had over our European competitors in the middle 1950s has disappeared. If we look at the production per man at work we shall find that we have been outpaced and outstripped by Japan and also our European competitors.
It was highly significant that, just prior to nationalisation, the Steel Board instigated a report, known as the Benson Report, which is basically what the British Steel Corporation is advocating for the 1970s. I am convinced that if its views had been implemented much sooner the position of the steel industry in this country would not be as bad as it is today. Therefore, when the Steel Corporation took over some 12 months ago it did so in a period of great difficulty, and also, as my hon. Friend says, in the wake of a difficult political conception. But I am glad to say that the offspring, the British Steel Corporation, 12 months later is a really thriving, bouncing organisation. I would endorse what has been said about the welcome to Lord Melchett, who is back in harness, and I sincerely trust that he will soon be fully recovered. I believe that the British Steel Corporation has laid the foundations for a highly efficient, a highly profitable, a highly productive and a highly remunerative industry and that in the next few years we shall see the fruits of this initial careful planning.
I should like to mention one or two points to which I believe the Government and the British Steel Corporation should address their minds. We have heard that production in the first half of this year is 5 per cent. up on what it was in the first half of last year, and indeed, in the second quarter it is up by 8·7 per cent.
I believe that the conservative attitude of the private companies to the export market is one of the reasons why our export performance is not anything like as good as our import performance has been. In ten years the export increase has been something like 30 per cent. whereas our import performance alas has been something like 63 per cent., which is not a good reflection on the private industry. I believe we must use all the machinery available to us now and that we must be ruthless in our attitude to,

selling abroad. One of the attitudes of the private companies was, "To remain profitable, to give our shareholders the dividends they want, we can only afford to carry 10, 15, 20 per cent. in the export market." I believe that this philosophy should go now, and that the British Steel Corporation should use every means within its power to push its export performance to its full potential.
On the question of long-term planning, I believe there is a great acceptance now in the steel industry, in the British Steel Corporation and the trade union movement, that if we are to remain competitive it is absolutely essential that we have low-cost production units and that we produce not less steel but more steel, and I believe that the plan which will be announced in the next nine months or so, when implemented, will give us the production growth we so badly need.
However, unfortunately, due to technological change and reorganisation, one thing we must be prepared for is a reduction in manpower. The British Steel Corporation must be made responsible for the people whom it will not require in the main steel production units, and should not be satisfied on giving a redundancy payment and saying, "There is the dole queue". The Government and the British Steel Corporation must accept responsibility for the deployment of manpower not required in the technological steel industry. To this end I suggest.that the British Steel Corporation should diversify its activities and consider going into the manufacture of durable consumer goods. If they do this, as contractions in a particular locality occur, then they can with Government help implement suitable alternative industries for those workers who will be made redundant.
I would mention worker participation in the industry. I was privileged to be one of the twelve part-time directors appointed to the British Steel Corporation. Reluctantly, as I was looking forward to this new challenge, I had to resign, even before I sat on my first board meeting. I have great faith in this experiment in the steel industry, which I am sure will gather momentum and become established in all nationalised industries and, I hope, in private industry. I am greatly impressed by the 11 people who have been appointed; they have a


wonderful contribution to make. I am glad to say that the more established directors in the British Steel Corporation have been very patient and kind to the worker directors. The worker directors have received five weeks' training in economics and allied subjects, and I have every faith that this will prove a successful experiment.
With dynamic and imaginative management; with the co-operation of the quarter of a million workers, one of whom it was my privilege to be for 16 years: with the moral, verbal support and economic understanding of the Government and of this House, then I believe that the Steel Corporation and the steel industry have a bright future.
I take this opportunity of wishing the British Steel Corporation as it comes to celebrate its first birthday many happy returns, and I know that its future will be prosperous. Those sentiments will I am sure be endorsed by the House.

2.2 p.m.

Mr. Nicholas Ridley: It is always a great privilege: to follow a maiden speaker in this House. The right hon. Gentleman the Member for Sowerby (Mr. Houghton) first congratulated me after my maiden speech and for that reason I have always had an affection for the right hon. Gentleman, an affection which transcends his strictures of large families, since I feel that mine is perhaps on the large side. On one occasion I had to congratulate no fewer than three maiden speakers who followed each other and whom I followed, and this gave me the difficulty of maintaining three such relationships at one time.
However, I will have no difficulty whatever, I hope, in maintaining a respect and admiration for the hon. Gentleman who has just made his maiden speech. It was, as I think all hon. Members will agree, a speech of great knowledge, great interest and great authority. A new Socialist Member of Parliament is a rare bird these days, so it is to the credit of the electors of Brightside that they have chosen to represent them someone possessing the high premium which is placed upon new Socialist Members of the House.
The hon. Gentleman referred to the famous passage from the Bible:

as sounding brass or a tinkling cymbal.
We, I am sure, regard his speech as sounding brass rather than tinkling cymbal. He will be very welcome to steel debates and other matters and the whole House will look forward to hearing from him again on many important occasions.
I echo his tribute to his predecessor, Mr. Winterbottom, who was much loved by hon. Members both on these benches and on the opposite benches. We remember how he sat through the long nights of the Steel Bill in Committee, always with a smile and bearing with fortitude the trials of that Committee. I hope that the physical strain which the act of nationalisation brought upon him did not in any way contribute to his illness and much-regretted demise.
One matter on the hon. Gentleman's speech which I would like to take up is that we have to have a nationalised industry to combat the competitive pressures faced by the steel industry. One is a little rueful when one considers that the American, Japanese and the vast bulk of the European industries are still in private enterprise hands. The argument that we cannot do this through private enterprise is one that we could not accept.
I would like to address myself particularly to the financing of the Steel Corporation. There is a little confusion about this. We are told that the Corporation drew £252 million worth of capital last year. We are now told that another £45 million has been incurred and another £30 million is immediately needed, so that there is £330 million immediately required for new capital.
The last Minister, the right hon. Gentleman the Member for Southwark (Mr. Gunter), whose departure we regret, told us at Question Time on 23rd April that £57 million of this was to pay off old dividends, and that £195 million was to pay off loans and overdrafts already incurred. This meant that the anticipated total was exceeded last year by £175 million. It is a little odd to be told that the estimates were £175 million out, when the main operation that was carried out was refinancing. If there were such loans, overdrafts and borrowings of various types, the refinancing of which the Government were to support, we would expect


to have been warned about it and for this amount to have been provided in the estimates. Will the Parliamentary Secretary give an explanation as to how it has come about that as much as £195 million of loans and overdrafts, which nobody expected, and of which no one had notice, has been refinanced? It could have been foreseen.
It is a little cavalier to bring forward after one year the date of the extension of the borrowing powers to £400 million without explaining where the money has gone and why it was not anticipated. I do not entirely accept what the Parliamentary Secretary said, that this is a pure book-keeping transaction which will have no effect on matters of substance. By substituting State borrowing for private loans and private overdrafts we increase the indebtedness of the State, and the State has either to tax us more or obtain more money from some other source, and the process is one which the people have had to pay for through taxation. There is no doubt that, of the £900 million of extra taxation raised, some part at least is attributable to having to find this extra £195 million, so it is not quite as simple as the hon. Gentleman seems to suggest.
Not only do we need more information about the spending of the vast sum of capital of £330 million in the past, but we also need it about the intentions for the future. The Opposition bitterly opposed the nationalisation of steel and have the strongest reservations about the wisdom of this action. Nevertheless, they have been extremely tolerant and reticent about pressing the Government or the British Steel Corporation for information about the future. However, the time is coming when we must have the plans. I would remind the Government that this is now a public industry. The plans have to be made public, and public accountability to the full must be followed. In no other sense can public control be exercised.
My hon. Friend the Member for Cambridge (Mr. Lane) referred to the article in The Times this morning. I thought that there was a requirement of 10 million tons more capacity, but it may have been 20 million tons read equivocally. Whatever it is, if there is to be a vast amount of new building, we want to know about

it, to know what the plans are, and what the future holds. I want to discuss it, because I believe that this is the right time to make a few observations about the whole problem of modernisation before anything is decided in relation to the capital aspects of the borrowing powers Order.
On what basis is the steel industry to be rebuilt? Quite clearly, new machinery and plant is invented every year which is better than the previous year's machinery and plant. If capital were worthless and cost nothing, it would pay us to pull down all our factories and plant every year and rebuild with the latest equipment. At the other end of the scale, obviously after a certain period of time, new machinery has to be installed because old machinery becomes so out of date and inefficient that it can no longer be competitive. Somewhere between the two extremes comes the right moment at which to replace plant and equipment.
The difficulty with nationalisation is that there is no market test to determine when it should be done. In many public industries, we are getting a situation which can only be called public affluence and amid private squalor, and the degree of investment in State industries is giving great concern to many on this side of the House and others outside it.
What we have to do is to invent a system whereby we can tell more accurately whether the replacement of assets is being done at the right rate and at the right time. The present rules of the Treasury are a great improvement. New investment in plant must pass a discounted cash flow rate test which has been put at 8 per cent. I want to know whether the projected rebuilding of the steel industry has passed that test. It is so hedged about with qualifications and difficulties that it is clearly impossible to get a straight answer to that question, but the answering of the question will depend on the level of taxation which is attributable to steel financing in the future.
It is not good enough to say that we must write down the capital of the British Steel Corporation from something over £1,000 million to something much less and then perhaps invest another £1,000 million or more in new plant. It is something which is peculiarly and unfortunately very difficult to do in nationalised industry.
The reason why writing off capital is difficult and why making new investment is difficult is that the money has to come from the taxpayer. The idea that it is in some way borrowed has ceased to be true, and both the write-off of old capital and the provision of new capital is now almost in full measure borne out of taxes. We who have to go to the poor, the widows, the pensioners and others who complain even about paying small sums of taxation must justify the putting of further loads on them for writing-off steel plants and building more steel plants.
The difficulty is that one of the joys of ownership in industry, for which hon. Gentlemen opposite have clamoured, is that one; is faced with enormous bills for the replacement of assets and there does not seem to be any way of inventing a reasonable and reliable discipline to know at what rate and at what time the assets should be replaced. The Treasury replies on a D.C.F. rate of 8 per cent., and now it is moving to marginal cost pricing. I would emphasise that an element in the costs within marginal cost pricing must be depreciation, and depreciation at replacement cost. There should be no loss in the process. There should never be any need to write off dead capital if the capital has been depreciated at the correct price.

Mr. J. J. Mendelson: The hon. Gentleman has referred to those hon. Members on this side who have clamoured for public ownership, and then he made the point about writing-off certain capital. Surely he would agree that the write-offs in the coal industry were the result of keeping down the price of coal over a period of 12 years and thereby partly financing our export efforts. It was not simply to make coal cheaper that it would have been otherwise. It was a national debt in the truest sense of the term.

Mr. Ridley: I do not deny that. But the wisdom of keeping the price of coal down at that time was questionable. It might have been better to have made coal achieve what it could raise financially in order to finance its own decline. There is a great deal of nonsense talked about the need to hold down prices. In many cases, it is preferable to keep prices up so that a greater amount of self-financing can be generated.
Originally, there was a discipline, and there should be a discipline in the raising of nationalised industry capital for investing in steel by means of the Government having to borrow what they invest. That is what we all think happens, but it does not. I have some figures before me which show that, during the last eight years, public investment has totalled £7,453 million, against which the Government have borrowed net from all sources £870 million. That means that 85 per cent. of public investment has either come from taxation or from the printing presses.
In those circumstances, the D.C.F. rate does not change, and what we have to do is to find a way whereby the increasing pressure on resources is reflected in increasing difficulty in raising money for public industry.
I suggest that the Government should return to financing all public investment by means of borrowing on the market. That would force the Government to pay the going rate for capital, and that, in turn, would force them to pass on to institutions like the British Steel Corporation the cost rate of the capital that they borrowed and force the D.C.F. rate to a level at which it reflected the real cost of borrowing the money that was invested.
I have never understood why there should be a difference between the D.C.F. rate and the interest rate at which the Government lend money to the Corporation. It is in that context that I view the present application by the British Steel Corporation for Exchequer dividend capital. If, as I have said, the right speed of write-off has been adopted, if the commencing capital debt is correct, if all the correct policies are adopted, and if the correct investments are made, there should not be any need to dodge a dividend and have flexible capital in the structure of the Corporation's capital debt. We know that Exchequer dividend capital is a pseudonym for not having to pay interest on what is admittedly a very heavy capital commencing debt.
If we think that the assets represented by the nationalised Corporation are not worth what they are said to be worth, it would probably be preferable to start off with a realistic assessment of the worth of the assets and force the Corporation to


pay a proper going rate of interest on that amount. Otherwise, we lose, in a mist of obscurity, the veracity of what we are trying to do.
I say to the hon. Gentleman who expressed such passionate conviction in nationalisation that these huge debts which are piling up, perhaps in respect of the over-valuation of the assets of steel at the time of nationalisation and the unworthily quick writing down of existing assets and the terrifying inability to determine what is the right rate of expansion, will fall on the taxpayer. Whatever the outcome may be, the resulting increases in taxation are the ultimate reason why the Conservative Party believe that nationalisation was a severe mistake in this context.
Be that as it may, we must have proper accountability. We must be told about the plans in the same sort of detail as we had for gas. We must be told what the issues are, because these are not purely commercial matters. We will have to go to our constituents and justify these increases in tax. That is never done in a private company. A private company raises its money on the market and ordinary people are not concerned one way or another about the future in the matter. But, once the taxpayers and their representatives become the owners of an industry, they have to be told what the plans are. Therefore, I hope that, long before the time this borrowing provision runs out, we will be given a complete and accurate statement about the plans of the Corporation, the new capital structure, the way of financing it, and all the matters upon which I have touched.

2.23 p.m.

Sir Geoffrey de Freitas: My hon. Friend the Member for Sheffield, Brightside (Mr. Eddie Griffiths), in his interesting maiden speech, referred to the consequences of the technical improvements in the manufacture of steel. One of the consequences of the technical improvements in the manufacture in steel in my constituency is not redundancy, but the failure of the industry to need more men. Corby is a new town which has been built at public expense with the infrastructure to support a population of 80,000—a swimming bath, a civic centre, a theatre, roads and services—but

the population, as a result of technical developments in this industry, shows no sign of getting anywhere near that figure. Therefore, public money is in danger of being wasted. We are in danger of wasting these public buildings and services because employment in steel is not expanding and new industries are not coming, principally because it is not a development area.
I do not expect my hon. Friend to deal with this point at great length, but, as a member of the Government, I ask him to note this unexpected consequence of technical improvements in the manufacture of steel when he and his colleagues discuss allocation of industry.
Like my hon. Friend the Member for Brightside, I support the Motion and I wish the Steel Corporation well on its first birthday.

2.25 p.m.

Mr. Patrick Jenkin: I am sure that the House would wish me to echo the words of welcome of my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) on the quite admirable maiden speech which we had from the hon. Member for Sheffield, Brightside (Mr. Eddie Griffiths). The hon. Gentleman started by claiming the indulgence of the House, in which we on this side, albeit under some provocation, felt it right to acquiesce.
Although the hon. Gentleman ventured into controversy, my view is that this is entirely proper in a maiden speech. I have always felt that the convention which seems to have grown up that maiden speeches should be uncontroversial is a mistaken one. Those who, in their maiden speeches, venture too far down the paths of controversy may suddenly find their heads being bitten off in full stream, and they would have no right to complain.
But I think that the hon. Gentleman's speech, which was delivered with great confidence and obviously with great experience of the industry pleased the House. I hope, as my hon. Friend the Member for Cirencester and Tewkesbury said, that we shall have the benefit of the hon. Gentleman's words in future debates on this and on other subjects.
We remember the hon. Gentleman's predecessor with great affection, both


as a man and as a politician. If I may end this introduction to my speech with one mild word of advice to the hon. Gentleman, it is that if he gets an embarrassing letter from a Minister he should not publish it in the Sheffield Telegraph. The hon. Gentleman's predecessor, Mr. Dick Winterbottom, delighted this side of the House, at any rate, and gave us much ammunition for what proved to be one of the most controversial passages of the Iron and Steel Bill.
A debate on a Borrowing Powers Order —and I bear in mind what you, Mr. Deputy Speaker, said at the beginning of the debate—has tended to become the opportunity which the House has—in many cases the only opportunity—to examine from time to time the workings of the industry under review. As a general rule, we do not debate the annual reports of the nationalised industries. The Select Committee on Nationalised Industries can examine an individual industry perhaps only once in every six or seven years. Therefore, we tend to rely or: Borrowing Powers Order debates as a means of appraising the activities of the industry as well as looking to the future and to the investment for which the money to be borrowed is needed.
I appreciate and understand the reason why the Parliamentary Secretary and not his right hon. Friend moved the Motion. I make no complaint about that. However, the information which he gave to the House as a justification for this increase in the borrowing powers of the British Steel Corporation can rarely have been so thin. I believe, therefore, that we have every right to probe and to question the case which the hon. Gentleman made and the plans for the industry for which the money is needed.
I recognise the limitations and difficulties in doing this. It is less than a year since vesting day, less than a year since the members of the Corporation have been able to grapple with the problems facing them, and there has been the added difficulty, with which we all have the utmost sympathy, of the illness suffered by the noble Lord, Lord Melchett, and the recurrent illness which again took him from his office and the great tasks facing him. We are delighted

to see his return. We hope that he has fully recovered. A man who holds the great responsibility of that high office requires a tough constitution, and I hope very much that the noble Lord is now fully recovered and will be able to take up his duties again.
The background to this debate is somewhat disturbing. I think it right to emphasise that we are here dealing with an industry, a single entity, which has net assets, excluding its long-term borrowing, of more than £1,000 million. This is a huge sum by any test. In the first two months of its operations it made a loss of about £319,000, before charging any interest on its long-term capital, and though it may be doing better, it is no more than breaking even in the first six months, without making any deduction for interest on its long-term capital, that is to say, on its commencing capital debt.
As the hon. Gentleman said, since vesting day the Corporation has borrowed £252 million, with a further £45,000 authorised since March, 1968. One has to look at this against the estimate of the figure which appeared in the Financial Statement last year at the time of the Budget, when provision was made for £75 million to be borrowed by the Corporation. It is true that the relevant paragraph of the Financial Statement said that that was subject to a "wide margin of error", but when one finds that the figure up to March this year is £252 million, against an estimate of only £75 milion, one is bound to ask how wide is a wide margin of error? This represents a massive miscalculation. We are told in the White Paper Cmnd. 3565 that the estimated requirement for 1968–1969 is £175 million. We hope that this will not be subject to the same massive error.
The error was not only in the Budget. It went back further than that, to the time when the Bill was being considered in Committee. The hon. Member for Penistone (Mr. Mendelson) is the only Member on the benches opposite at the moment who was a member of that famous Standing Committee.

Mr. Ridley: I think that the figure in Command 3565 is £100 million for the coming year. It was £175 million last year.

Mr. Jenkin: I am grateful to be corrected.
It is true that the net amount to be borrowed from the Government is £100 million, but the total amount of borrowing—and the borrowing power covers the total amount of borrowing—is, as I understand, and no doubt the hon. Gentleman will correct me if I am wrong, £175 million.
I return to what was said in Committee when the Clause which we are now discussing was under debate. The Parliamentary Secretary referred to the debate which took place on 6th December, 1966, and quoted his predecessor the present Parliamentary Secretary to the Ministry of Technology and indicated that what was said then was "a rough estimate." Those words appear at column 1930. I am glad that the Minister of Transport is here, because I am sure that he remembers those debates with nostalgia.
I think it right to say that those words referred to a point which had been raised by my hon. Friend the Member for Cirencester and Tewkesbury about the extent of self-financing which could be used for capital expenditure. The question arose of the 65–35 per cent. split being right, and that was what the hon. Gentleman referred to as a rough estimate.
When the hon. Gentleman talked about the total borrowing requirements and the time scale for which the Clause would operate, he did not qualify his words with anything like that sort of language. I have already quoted what he said, and I have no hesitation in quoting it again. He told the Committee:
First of all, the total borrowing powers relate to a five-year period and the lower sum of £300 million would, we hope, be adequate for a three-year period."—[OFFICIAL REPORT, Standing Committee D; 6th December, 1966. c. 1927.]
The hon. Gentleman referred again to the three-year requirement for borrowing. That was said firmly and qualified only by the words "we hope". It is not three years, it is one year, and instead of coming back after two and a half years just before the period ran out, he has come back after about eleven and a half months. By any standards that forecast must be regarded as deplorable, and particularly is it so when we are told that this is not due

to sudden, unforeseen capital expenditure.
This is a question of funding debts which were owed by the companies taken over at vesting day. Surely to goodness this could have been foreseen! Why was the then Parliamentary Secretary able to make an estimate which proved to be so wildly out? This was not a random figure. The constituent figures which gave this requirement of £300 million over three years were spelled out in the debate. Why has the then Parliamentary Secretary been proved so wrong? This was no wild guess, and yet it has turned out to be wholly denied by events.
The impression created during the debate on 6th December was that the details were all to be spelled out in the first report of the Corporation to the Minister under Clause 4. As we know, the Report was issued in August of last year, and I am sure the Parliamentary Secretary will concede that it contains no financial information at all. All it deals with are the organisation of the Corporation and the structure of the management.
Subsequently, we saw the 1967 accounts of the 14 major companies, and it was made clear that we were not to regard this document as in any sense an annual report. The Press handout which accompanied the issuing of that document said:
The accounts should in no sense be regarded as the first annual report of the Corporation. This will be published in the early months of 1969 …
Apart from the gross mis-estimate by the hon. Gentleman's predecessor during the passage of the Steel Bill, and by the Chancellor of the Exchequer, or presumably by the then Minister of Power, we have had virtually no information about what this money has been required for, or why the estimates have been so wildly inaccurate. What we have been told is what the Corporation hopes may happen to its finances in future. This we have had to learn almost entirely from the Press, until the Parliamentary Secretary gave us a little information this afternoon.
We are told that the Corporation is hoping to write down its assets by £150 million. This is a very big sum indeed. We are also told that it hopes to put part of its capital into Exchequer dividend capital. No doubt the Parliamentary Secretary will be able to confirm that both


those steps will require further legislation. Can he say when that further legislation is likely to be presented to Parliament? Will it be done next year? In other words, is the reconstruction of the Corporation's finances regarded by this Ministry as a matter of great urgency?
We now have the extra £100 million borrowing which, if the Motion is accepted, will tide the Corporation over. For how long will it do so? We were given no indication by the Parliamentary Secretary of how long this sum of £100 million was intended to last. We were told that £30 million of it is already earmarked for facilities which have been negotiated and which the Corporation will be empowered to accept if the Motion is approved. How long will it go on for? When will legislation be introduced further to increase the Corporation's borrowing powers? We have had no information about this.
We have been presented with the most woefully scanty information, on the basis of which we are being asked to approve the Motion. Until the hon. Gentleman spoke, all we had to rely on were gleanings from the Press, which has clearly been talking, perfectly properly, with officials of the Corporation. I must protest. I do not believe that a request for increased borrowing powers can ever have been brought before the House with the Government having done so little to provide the necessary information to enable a proper decision to be made.
When my hon. Friend the Member for Barkston Ash (Mr. Alison) opened the first debate on the Clause that is now Section 19, he referred to borrowing as "the lifeblood of the industry". So it is. It is where the money comes from. Apart from internal financing, it is the only source of investment and expansion. It is a basic element in the whole philosophy of right hon. and hon. Gentlemen opposite when they push through nationalisation Measures that it is intended that the industry should become answerable to, and responsive to control by, the democratic assembly of the nation. Here we have the very first Borrowing Powers Motion with virtually no information on which to base our decision. We are almost wholly in the dark as to what the money is required

for, or why it should be required so much sooner than was originally thought.
My hon. Friend the Member for Cambridge (Mr. Lane) referred to the article in The Times this morning. I cannot believe that it was intended to be a prospectus for today's debate. From such inquiries as I have been able to make it appears that it was wholly fortuitous that it appeared today, and it is doubtful whether the science correspondent of The Times was even aware that this debate was taking place today. The sort of sums of money which the article indicates will be spent between now and 1975, if we are to have a 20 million-ton replacement in the capacity of the industry are staggering. One is talking in terms of £700 million or £800 million of new investment. Can the hon. Gentleman give us more information about future legislation for further increases in the borrowing powers?
Parliament has every right to expect that before the Government ask for more borrowing we should have, what is badly needed, a sober, realistic, factual report on where the money has gone and what any further money is required for. That would be in marked distinction to the trickle of Press articles we have had, flying kites as to the various forms of rationalisation investment which the Corporation might wish to undertake. We must have a sober, factual report, because it is only on that that we can be expected to judge these matters.
The recent articles in the Press seem to me to have evinced a heady optimism which appears to run the risk of ignoring some of the hard, uncomfortable commercial facts which the Corporation is likely to face not only now but for some years ahead. As they are all we have to go on at present I hope that I shall not be blamed for placing some reliance on these articles. If we are to judge from them, all the signs seem to be that the Corporation is running the danger, run by a number of major science-based industries, of being too production-orientated, with a management and business philosophy guided too much by the objectives of those concerned with production, development and research and not enough by those concerned with the commercial side, notably sales, marketing and finance.

Mr. Mendelson: The hon. Gentleman, who also served on the Standing Committee, will recall that the need for a large amount of new capital expenditure, both for expansion and replacement, was common ground among both sides of the Committee. Therefore, I find it very strange that he should now express surprise that replacement and expansion will require a considerable amount of new financial investment.

Mr. Jenkin: Of course it was common ground. But the sums we now expect to be asked to contemplate in any further borrowing powers bear no relation to the figures that were common ground then. We were relying on the tables in the Benson Report, which gave the sort of investment figures which the Benson Committee felt would be required to carry out the measures of rationalisation which it proposed in Stage 1 of the Report.
It said there that up to 1970 the total borrowing from outside sources would be only £125 million. But here we are up to £300 million borrowing from the Exchequer by 1968, and a further £100 million is now required. The hon. Gentleman is failing to take the point that we have here, two years earlier than we were told in Committee, a requirement for increased borrowing powers which goes beyond anything which was common ground between the two sides in Committee.

Mr. Mendelson: The hon. Gentleman must not quote the Benson Report as Holy Writ. He knows that both on the stocking of steel and the future of the industry many of us maintain that it is not at all reliable. We said that the expansion of the industry was suffering because of the reluctance of private owners, for whom the Report was speaking, to spend properly. The Government were charged with doing that. They will have to explain their policy, and will do it successfully.

Mr. Jenkin: The hon. Gentleman may well make his contribution later, if he catches the eye of the Chair. Perhaps I should not follow him too far down that road, or I should be in danger of being out of order.
If the Press articles to which I have referred are to be taken as in any way

an accurate guide, there are signs that the Corporation is in danger of becoming too production-orientated and simply hoping that turnover, sales and the return on the capital will follow automatically with an increased investment in productive capacity. These apprehensions are bound to be increased in the case of a State industry where the normal checks, the normal financial disciplines of the market, do not exist, and the only barrier between financial extravagance and the industry are the Ministers responsible for the industry. If they fail in their duty rigorously to scrutinise the industry's capital requirements, even that last check is removed.
The Motion is not a happy augury, because the Minister seemed to feel that all that is necessary is that the Government should give us an anodyne speech as to their hopes for the future, and that they form sufficient argument on which we should base our decision to approve the Motion. I believe that the Parliamentary Secretary has admitted that there was a gross miscalculation resulting in a much earlier demand on the Exchequer for money. The House and the country can reasonably expect that the right hon. Gentleman should accept his new responsibilities seriously and should aim swiftly to get a grip on the finances of this great new Corporation and inject that measure of financial discipline without which all the aims, hopes and aspirations which hon. Members on both sides have expressed will be as but dust.
I should like to put one or two detailed questions to the Parliamentary Secretary arising out of the debate and the points that he made.
There is the question of the reconstruction of the capital debt. I ask the Parliamentary Secretary to bear one point firmly in mind. Unlike almost every other nationalised industry, this industry is in direct competition with producers in the private sector. Will he be prepared now to give an undertaking that any reconstruction of the capital debt of the Corporation will not be such as to enable it by a mere device to have an unfair advantage over the private sector?
The private sector has built into the Act for its benefit many safeguards. No


doubt under Section 30 it would be entitled to go to the Minister and make its complaints if it felt that as a result of the reconstruction of the capital debt the pricing policy of the Corporation was unduly weighted to its disadvantage. If the Parliamentary Secretary can give an undertaking that that is a factor that he will bear closely in mind, it will go far to reassure those who are already expressing anxiety because of what has appeared in the Press.
Secondly, there is the question of rationalisation. I endorse what was said on page 11 of the first Report of the Corporation:
there is everything to be said for avoiding delay in starting the rationalisation widely agreed to be necessary ".
There is, as the Parliamentary Secretary is aware, considerable uncertainty in many fields in the industry. This is especially so in cases of complaint which are generally known to be, for whatever reason, in what are now uneconomic locations, such as Consett, Workington, Ebbw Vale and the Shotton Works of John Summers. I know that anxieties are being expressed, certainly to the Corporation, and, I believe, also to the Minister, from people in these areas.
To take one example, I have been privileged to visit the Ebbw Vale plant. The Parliamentary Secretary will know that there has been heavy investment in Ebbw Vale over the last decade with the full support and consent of the Conservative and subsequent Governments. Yet the continued talking about the need for rationalisation, the need to write off capital debt which is not represented by income-producing assets and the need to concentrate production in favourable locations is bound to call into question the continuance of operations on a site such as Ebbw Vale. The same can be said of Consett and similar plants.
All I ask—one cannot ask for more—is that the decisions on these matters should be taken with the greatest speed. It is of the utmost importance that uncertainty should be removed at the earliest opportunity.
This problem was faced in the Benson Report. It was recognised that the answer for many sites is that, although basic steelmaking probably will eventually cease to be carried on there, many of

the finishing processes, processes down the line, can with advantage continue to be carried on at these sites which have all the social capital—that is a phrase which occurs in the Benson Report again and again—available as well as all the skilled manpower to enable this to be done. If this is to happen, the decisions must be announced as soon as possible.
It simply does not lie in the mouths of those who demanded nationalisation, who argued that the main reason for it was the need to rationalise the industry and who are now calling for the writing off of uneconomic capital to refuse to say what the consequences of this will be. This is if I may say so particularly important for those who represent the constituencies that are likely to be affected.
I now want to say a word about centralised marketing. My hon. Friend the Member for Cambridge referred to this. This is a matter which has caused considerable anxiety, particularly among consumers of steel. In paragraph 64 on page 25 of the first Report the Corporation stated:
The spur of competition, other than in price, between the Groups and between the units below is in our view highly desirable.
Elsewhere in the Report there are references to "strong technical rivalry", and so on. I believe this to be as absolutely the right approach. However, what are we seeing at the moment?
When Lord Melchett and some of his colleagues visited America it was reported that they came back very much impressed by the arguments for much greater centralisation of marketing and selling. I believe that they have been misled by this and would do well to have regard to what they said in then-first Report published after vesting day.
I have already mentioned consumers. Any centralisation of marketing and allocation of orders between different producing centres is bound to limit choice; this will have an effect on quality, which is already affected by the loyalty rebate; any centralisation will be damaging to consumers.
I ask the Parliamentary Secretary to bear in mind that one of the factors on which one has to concentrate in any reorganisation of this sort is the problem of the injection into the management of the most effective stimulus to greater


efficiency and greater enterprise. If the managements of the constituent groups and the constituent units in the British Steel Corporation cease to be responsible for the winning of orders and the satisfying of their customers as to quality and merely take the orders that are farmed out to them from a central authority, a great deal of that stimulus will be removed.
There must be the spur of achievement in earning the return on capital ensuring the growth of the business and securing the results which the management seeks to achieve. That must be a vital factor in any management structure. I should be very much afraid, if there was too great centralisation of selling and marketing, that much of the stimulus would be removed. It would gravely impair the incentives which must operate on management.
The American example is not a wholly relevant one. Although the individual steel companies—Bethlehem, United States Steel and so on—operate centralised organisations, they do so in competition with each other and there is a wide measure of competition. Here, the British Steel Corporation, with 90 per cent. of the trade, would be the only major producer, and I believe that centralisation would eliminate a great deal of valuable competition which can exist even without there being price competition.
Finally, in the international sphere, my hon. Friend the Member for Cambridge expressed disappointment, as I felt, that the Parliamentary Secretary was unable the other day in reply to a supplementary question from myself to indicate that there had been any progress in the talks with a view to bringing order to an industry where what is going on is widespread mutual dumping. We can do something here by swift imposition of anti-dumping duties if dumping is proved. But the problem is much wider than that. There is great over-capacity in the world, and countries are now dumping on each other on an almost unprecedented scale. This results, inevitably, in very low returns on capital and, of course, in grave difficulties for individual nationalised industries.
What is the Government's attitude? Do they regard international action as being

an answer? If so, why do they not do more to press this ahead? Or is it thought that this would result in some form of undesirable international cartel and that they see the remedy in some other way? If so, I believe that the hon. Gentleman owes it to the House to explain the Government's attitude.
I agree that the Corporation will need more money, and not only this £100 million, when we have further extension of the borrowing powers. But could not part of it be found by hiving off those activities of the Corporation which are only indirectly, if at all, related to the basic production of iron and steel? We had long arguments in Committee about the wide diversification powers of the Corporation and the many non-steel activities which were being swept into the maw of the Corporation by the Act.
Does it help to concentrate the management's attention on the basic problems of achieving rationalisation in iron and steel production if it is, at the same time, also responsible for operating brick works and is engaging in the construction industry, engineering and many other forms of subsidiary activity? Could not more of the capital needed be found by selling off these activities to the public? I believe that this would do a great deal to concentrate the attention of the management on the vital problems facing the industry.
We do not propose to divide against the Motion. We are bitterly disappointed that the information given to enable us to consider it has been so inadequate and that the Motion should have been brought forward so much earlier than originally envisaged, but we recognise that the Corporation must have resources with which to carry out its task and the fact that the Government made such a miscalculation of this requirement 18 months ago should not prejudice the Corporation in its efforts to deal with the problems facing it.
We hope that the Corporation will succeed in achieving some of the objectives which the Government saw as the primary object of the Act. If we have our doubts, we shall continue to keep them for the time being muted. The most important thing is that the management of this great enterprise should be encouraged to give of its best with the


minimum of interference from the politicians. I hope that the contribution the House has made to that end today may have gone some way to helping the industry to face the problems with the confidence and determination which I am sure it wishes to have.

Mr. Speaker: I might have allowed the debate to proceed on narrow rules of order, but I broadened it. However, I am in some difficulty. If it were not for the strict rule of the House which necessitates a vote when an hon. Member calls attention to the presence of strangers, I would have informed the House that, in the Strangers' Gallery, listening to the debate, there is a very distinguished British citizen who has brought honour to his country—Sir Alec Rose.

Hon. Members: Hear, hear.

3.3 p.m.

Mr. Freeson: I warmly welcome your intervention in the debate, Mr. Speaker, to give the welcome of the House to our distinguished visitor.
Before I deal with some of the points raised in the debate, I would like to add my congratulations to my hon. Friend the Member for Sheffield, Brightside (Mr. Eddie Griffiths). I am sure that, despite the implied remarks to the contrary by at least one hon. Member opposite, his arrival precedes the arrival of many more Socialist Members in due course. For the time being, I confine myself to congratulating him on the thoughtfulness of his speech, on the inside information and knowledge he brought with it, and to expressing the view that we welcome the kind of experience that he brings and look forward to hearing it in future debates and studies of the problems of the steel industry.
My hon. Friend raised several points about the industry which I am sure will be noted by the Corporation, as they will be by the Ministry itself. It may be that, to some extent, I will refer to them directly or indirectly in my remarks but I want to single out one of them for a brief comment now, although I commented on it in opening the debate. It concerns the question of worker directors. Before he came here my hon. Friend was one of the 12 workers in the industry chosen to become a worker-

director. I met the remaining 11 some two or three weeks ago in a most interesting series of exchanges and discussions in the House during the course of studies on which they embarked under the auspices of the Steel Corporation and the T.U.C. I found it a stimulating and interesting experience.
Most of the issues which were raised in the debate were covered again more extensively by the hon. Member for Wan-stead and Woodford (Mr. Patrick Jenkin). I shall deal with as many as I can and if I overlook any matters of substance, we shall study the OFFICIAL REPORT and do our best to answer in detail. The hon. Member for Wanstead and Woodford referred to dumping, a subject which was mentioned at Question time the other day, and asked what was our position and whether we expected any progress in the international discussions now going on, and what the Government's attitude would be if the present state of affairs continued.
It is not possible for me today to say what progress, if any, there has been in these international discussions. I do not have the details of times and dates, but I understand that we have made it clear that we would be prepared to take antidumping action if it were necessary. But we have not had representations from the B.S.C. on dumping to date, although there has been at least one case in which the Government have taken action, that of Canadian galvanised sheet steel some little time ago.
It must be remembered that the main issue of competition is primarily a matter for the B.S.C., and I am sure that it, as is the private sector, is quite capable of presenting a case to us if it is necessary for action to be taken. In the meantime, international studies of the world situation are taking place, with our full participation in O.E.C.D. and in the Council of Association of the E.C.S.C., and we must await their outcome. It is at least indicative evidence that a consequence of devaluation has been a drop in the rate of imports—more correctly, a check in the rising trend of imports— and I have figures which show that they are now about 2¾ million tons per annum, which is about 11 per cent. of demand. The Corporation expects that steel exports this year will be twice as large as imports. This is a subject on


which we await further information from the industry if it is necessary, but it is not a matter which we treat lightly. This is a serious situation which is being closely watched by the Department as well as by the industry.
The hon. Member for Wanstead and Woodford raised the issue of the company structure, as did the hon. Member for Cambridge (Mr. Lane). As I shall have to say on a number of issues, in this respect we will have to await the report, which we are expecting to have by the end of the year, about the future position of the Corporation and its organisation.
As to the structure of the industry, I can assure Members that the Minister has asked the B.S.C., when preparing this report, to make a very thorough evaluation of the case for or against the reshaping of its organisation. It is impossible for me to indicate the outcome of the report, but we have shown that we are interested in this and I am confident the B.S.C. will deal with this thoroughly.

Mr. Patrick Jenkin: Will the hon. Gentleman deal with an important point I raised about the impact that this would have upon fair competiton with the private sector? Will this factor be very much in his mind?

Mr. Freeson: I can give the assurance that in so far as there is any change it will not be a device to introduce an element of unfair competition with the private sector. If there are conclusions leading to the reshaping of the company structure, they will be based upon internal needs as the B.S.C. sees them, and will not be devices for unfair competition. There is adequate machinery for making submissions to the Minister about unfair trading practices.
The hon. Member for Wanstead and Woodford spoke about rationalisation, and urged that decisions be taken as quickly as possible to relieve anxieties felt in plants and among staffs in different parts of the country. This too will have to await the report, but the B.S.C. is well aware of the need for speed in getting the industry organised properly.
Another point that was stressed, perhaps a little unduly and repetitiously, was the reason for the early return of the Government to the House seeking leave for an extension for borrowing powers. It

was said that I had been remiss in providing so little information in my opening remarks. Another question was: How could there be such a serious underestimate of the requirements of the industry so soon after vesting date? The first point to remember is that the B.S.C. did not underestimate. No criticism can be levelled against it. Remarks of hon. Gentlemen implied that this was another way in which nationalised industries did not do their job properly.

Mr. Patrick Jenkin: I never said that. I would not wish to make any criticism of the Corporation. This is a responsibility and failure resting squarely upon right hon. Gentlemen opposite.

Mr. Freeson: Upon reading the OFFICIAL REPORT hon. Members will agree that the content and manner of the remarks gave the impression that this was a criticsm of the new set-up in the industry. If there is any responsibility it rests with this House and members of the Government.
I am advised that in Committee—I was not present; I was not then in this office—my predecessor made it clear that the estimates which could be made for internal financing could be only rough estimates. But we cannot separate the possible level of internal financing from the need for further borrowing powers. One is linked with the other. If one has miscalculated on the amount of internal financing, clearly one has to draw capital from elsewhere; one will require extended borrowing powers. My predecessor said that these were rough estimates. I will give further information about precisely where they went wrong.

Mr. Ridley: The hon. Gentleman is addressing himself to the wrong point. The point is this: why did not the Government know that £195 million worth of obligations, debts and overdrafts would have to be refinanced when they put the estimate in last year's Budget? This is nothing to do with self-financing. It is question of financing the existing debts and obligations of the companies. Why did not the Government know about them and tell the House about them?

Mr. Freeson: I do not know why the hon. Gentleman should assume that I


am dodging the question. I was coming to the point. It is nonsense to suggest that one can separate the level of internal financing from the need for borrowing.
It has been suggested that we should have known what the full extent would be. It would have been very difficult, in advance of vesting day for the Government or any other authority acting in this matter to have known fully the liabilities with which they would have to deal. The Corporation, in taking on its responsibilities, subsequent to the Measure becoming law, found that instead of an estimated bank overdraft fundable of £32 million, £79 million in liabilities of the companies which it inherited had to be funded. It found in connection with trade bills and acceptance credits in respect of the companies which it took over that a nil estimate turned out to be £47 million.
I could quote a number of other items. We are prepared—[An HON. MEMBER: "Astonishing."] There is nothing astonishing about it. I think that it is true to say that the people operating the Corporation are reasonably competent and to suggest that it is astonishing that they should have discovered this is a criticism of them and not of the House.

Mr. Ridley: I must press the hon. Gentleman on this matter. He is now saying that the Government proceeded to nationalise steel without realising that the industry was worth £195 million less than they expected. How could an Administration be so crassly incompetent as the one of which he is a member?

Mr. Freeson: The hon. Gentleman should not insist on making little dramatic speeches in interventions. If he has a point to make, we will seek to answer it. Never mind the dramatic interventions. If he is eager to learn of the state of the industry prior to vesting day, I suggest that he awaits the report that we shall get in due course from the industry. I am sure that it will give all the information required by hon. Members on both sides of the House.
I have sought to deal with the matters on which I was asked for information and with the question of the additional finance required which has given rise to our earlier return to the House for the

money necessary to enable the Corporation to fulfil its obligation. I should deal briefly with the question of the capital reconstruction which was referred to at great length by the hon. Member for Wanstead and Woodford and other hon. Members. Clearly, hon. Members opposite are being rather precipitate. I indicated in my opening speech that this must await the report that we shall get from the industry. It will involve our consideration of how the starting capital debt is to be treated. Similarly, we must await that report, and the requirements and recommendations which it indicates, before we can know whether there will be a need for legislation, let alone the timing of the legislation.
It will depend upon the kind of financial recommendations that are put to the Government and are finally approved. Then, it will be decided whether legislation is necessary. This afternoon, therefore, I cannot indicate a date or whether there will be need to bring forward legislation.
A number of points were put concerning the future running of the industry. These points arise under the general heading of the structure of the industry, for which, again, we must await the report.
I regret that by the nature of the situation, it being an interim point in time, one cannot go into detail beyond giving the kind of broad outline and summary progress report that I sought to do in my opening remarks. I can, however, assure the House that clearly it will not be long before the Corporation is able to submit a full report to the Government. There will be ample opportunity for Parliament to consider any submissions which are made and any legislative proposals that need to follow. Full information will be available to hon. Members about the proposals of the industry and of the Corporation for the future and the extent to which they are accepted by the Government and acted upon in conjunction with the Corporation.
It is unfortunate from a Parliamentary point of view that one must discuss the situation on such an outline basis instead of full information, but that is part of the facts of the situation. It is not the result of trying to hold back information or views which hon. Members want to


hear and discuss. There will be ample opportunity for this and we intend to keep in close touch with Parliament when we have received the recommendations of the Corporation and have any conclusions of our own to put forward on the future of the industry.

Question put and agreed to.

Resolved,
That section 19(4) of the Iron and Steel Act, 1967, shall have effect with the substitution for the reference therein to £300,000,000 of a reference to £400,000,000.

INDEX OF RETAIL PRICES

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Ernest G. Perry.]

3.24 p.m.

Mr. Norman Atkinson: In welcoming the Report of the Cost-of-Living Advisory Committee, which was published last Wednesday, I should like to make one or two comments in the hope that my hon. Friend from the Department will be here to hear some of my comments about the conclusions which have been reached.
First, we should put on record that the Consumer Council is extremely gratified and grateful for some of the recommendations which have been made by the Advisory Committee. Indeed, most of the criticisms made by the Consumer Council and published by it last April are now incorporated in the recommendations which have been put before the House.
I welcome particularly the recommendations which have suggested that pensioners, where there are one or two members of a family, should have an index of their own. This is something for which on this side of the House we have argued for a long time, and we are grateful that it is now recommended to the Government. There are a number of other features about it which are also acceptable, and I hope that the Government will, before very long, incorporate the proposals made for the new structure.
Personally—and this is the view of other hon. Members on this side—I hope that they will very shortly go much further and start to reconstruct the whole of

the index in a different way and base the new index on the cost of living rather than on prices. A point which strikes me about this is the fact that the Advisory Committee itself has recommended that the name be changed from that of the Cost-of-Living Advisory Committee to the Index of Retail Prices Advisory Committee. I hope that the Government will not pay attention to that recommendation because, like many other hon. Members, I hope that this will ultimately become a cost-of-living index and not, as it is at present, a prices index. There is a very great difference between the tables of the one kind and the other. The index of retail prices does not represent the cost of living.
I mention this because I believe this to be one of the most explosive issues in politics. Certainly, the Labour movement has suffered during the last three years from public criticism of the Government that the index does not represent truly the increases in the cost of living It is argued, and it is certainly borne out by our by-election experience, that the Government are seen to restrain wages while, at the same time, trying to encourage price increases. People can see prices increasing, the cost of services going up, and so on, and yet they feel restraint upon their incomes. This has led to tremendous criticism of the Government and, as has been seen at by-elections and on other occasions, the Government have suffered criticism for what, to be fair, is not altogether their responsibility, as I hope to prove in a moment or two.
None the less, people do not accept that the Index of Retail Prices has represented the true increases in the cost of living over the years past. They believe that this is a sort of brain-washing process. In general terms, it is referred to on the doorstep as "baloney". That is the sort of attitude that people have towards these figures. They have no confidence in them. If the Labour Government are to re-establish confidence in the work they are now trying to do they have somehow or another to re-establish confidence and understanding, and to present the figures in a way which people will believe to be a true reflection of what was going on.
For instance, if the Press were to undertake an opinion poll and were to put the


question to people, "Do you believe that the Index of Retail Prices is true or false?" the overwhelming reply would be "It is false." This is borne out by many of the comments in letters to the Press which we so regularly see.
Now that my hon. Friend has arrived, I am about, as he will recognise, to get to some of the meat of the argument.

The Under-Secretary of State for Employment and Productivity (Mr. Roy Hattersley): I beg my hon. Friend's pardon and I am grateful to him.

Mr. Atkinson: We must ask why people do not believe in the figures and why they have no confidence in them. I wish to show how people see the rises in the cost of living and how those rises affect their living standards.
An item which has frequently been put to me in correspondence is the cost of motoring. The weight given in the index to motoring is almost the same as that given to housing; there is just a one point difference, a one-thousandth difference. Almost half the people are motorists and are concerned about the effects of the Budget upon motoring costs. I take the example of the motorist who uses his car for travelling to and from work and occasionally for pleasure, using four gallons of petrol a week. Prior to the Budget the annual cost of doing so was about £75, taking the combined cost of road tax and petrol and excluding depreciation costs, and so on. As a result of the Budget, those costs have increased by 12 per cent., from £75 to £84 5s. per year.
This is shown in the index under "Transport" as a 4 per cent. increase for the reason that as all the inhabitants of the country are not motorists the figure is divisible. In the official index of the cost of living it appears as an increase of such an infinitesimal amount that it has almost disappeared. The motorist suffers a 12 per cent. increase in the cost of his motoring and sees nothing to show for it in the index, and, therefore, he says that the tables are "baloney", they are wrong, and do not reflect the rise in his cost of living.
An almost equivalent weight is given to housing in the index. Council tenants and private tenants in the London area, because of the new regulated rents which

are being established, have suffered over the years on average a 20 per cent. increase in rent. The rising costs of building and the increase in the cost of money have affected local authorities by about a 20 per cent. increase. There is little to show in the index for these tremendously increased costs. People in London are suffering enormous rent increases, in some cases as much as £2 or £3 per week; in one case an increase of £5 10s. per week has been suffered as a result of a registered rent. Such increases represent an enormous percentage of people's incomes, yet there is little in the index to show that increases of this sort have taken place.
Those are two reasons why people reject the index as being representative of the increased costs which they are suffering in their everyday lives. It is why they believe that they are being conned with these figures, which have been so important in the consideration of wage negotiations until recently, and which have a tremendous bearing on internal costs.
I want to go back over a period of 30 years, to 1938. It is only by doing that that one can judge the accuracy of the tables and decide whether the conclusions to be drawn from the index in terms of the cost of living are correct. As a result of my own and other people's researches, there are some remarkable figures which disprove the accuracy of the index. Today, the £ is worth 5s. 6d. in purchasing power compared with 1938. Over the same period of 30 years, the wages of manual workers have gone up nearly 600 per cent., which would suggest that our living standards should have increased enormously over that time. However, the facts do not support that.
There have been tremendous advances in technology and medicine, and the quality of our life has improved over those 30 years. But, in hard economic terms, manual workers have had nothing like the increase in their standard of living that the index would suggest, and I want to give some brief examples to show that.
I have four which I think are representative, and I present them in this way because I oppose the economists who argue that the cost of living and living standards over the years can be measured


by indices of this sort. That is grossly misleading, and I want to put an alternative point of view which also answers those who charge manual wage earners with being responsible for many of our economic problems. It is a charge which is not substantiated, and, although it is part of the prices and incomes policy as a whole, it is important that the point should be made on behalf of our manual workers.
The only way in which one can measure the living standards of people is by asking how long it takes a worker to earn enough to buy the product that he is making. There are some very good examples which indicate what has happened over the last 30 years.
I take, first, the case of a coal miner. In 1938, it took him exactly 1¼ hours to earn sufficient to buy 1 cwt of coal. According to information provided by the Coal Board, in 1968 it takes a miner exactly 1 hour and 20 minutes to earn enough to buy a bag of coal. His living standards have gone down relative to the commodity that he is producing.
Then I take a cabinet maker—and I am not speaking about my right hon. Friend the Prime Minister—but about a cabinet maker producing timber products. In 1938, it took a cabinet maker exactly a week to earn enough to purchase a kitchen cabinet. From photographs and specifications, I have been able to select a kitchen cabinet of almost identical construction which is produced today. It contains the same weight of timber and almost the same amount of work goes into it. Today, it takes a cabinet maker exactly a week to earn enough to purchase that kitchen cabinet. Therefore, the living standards of the coal miner and the cabinet maker are the same.
There is a revealing situation concerning the skilled building worker. In 1938, on average earnings, the skilled building worker had to work 100 weeks to earn sufficient to buy his own product—the average little semi-detached that we knew well all over the country in 1938. A skilled building worker today, who is doing well and having a good year, needs to work 150 weeks to earn sufficient to buy his own product. That is a remarkable situation when one measures living standards in this way.
I could go through a whole list of skilled trades, including engineers. One finds that it takes the same, or in some cases more, hours for the worker to earn sufficient to buy his own product. That is the only way in which we can measure the living standards of manual workers. It is not true, as the index suggests, that we have never had it so good. In that sense there is a tremendous difference.
Of all the skilled trades that I have examined, only one shows benefit to the worker through productivity. I refer to the electricity supply worker. His earnings per hour in 1938 enabled him to purchase 22 units of electricity. In 1968. based on an average consumption of 400 units per quarter, which is a very small amount but it illustrates the point, he is able to earn per hour the equivalent of 32 units of electricity. That is the only example, with new techniques and methods within a more sophisticated industry and society, where the worker is shown to be able, with one hour's work, to purchase more of that which he produces than in 1938. I think that the examples I have quoted condemn the accuracy of the index as we see it at the moment.
I now move on to the claim that the index should be based upon a regional pattern. Why is this so important to trade unionists? Why is it so revealing? The Advisory Committee has said that it may be that costs will ultimately prevent it from designing a regionally based index and prevent it establishing a cost of living index as distinct from the Index of Retail Prices. But I hope that the Government will have another look at that, because it is important that we get this right regarding manual workers. It has a distorting effect upon earnings in this country and it is changing the pattern. Although I represent a London constituency, it is fair to point out that London workers particularly have suffered as a result of this type of index which has influenced base rates throughout heavy engineering and other industries.
Why should it be on a regional basis? I have discovered some astounding facts which are not recognised. I have tried to take a representative sample of manual workers in industry and the kind of earnings that they get. I am sure


that I will shatter a few illusions in presenting these facts.
The United Kingdom is divided into 10 economic regions. In all publications it is done in this way for obvious reasons. It has long been assumed that London industrial workers have always headed the list. They did so in 1938. But, because of the kind of retail indices that we use, the influence has always been against the interests of London workers.
What do I mean by that? If we take skilled time workers, including overtime but excluding piece workers, the hourly rates are somewhat revealing. The West Midlands are at the top of the table, with earnings at 11s. 6d. per hour. No. 2 is Wales—and no doubt this is a shattering thought for some of my Welsh hon. Friends—with earnings at 11s. an hour. Next comes the North of England, including the North-East, which more or less shares that position with London and the South-East, at 10s. 9d. Fifth is Scotland, at 10s. 7d. At the bottom, there is Yorkshire, where the figure is 9s. 4d. That table of earnings is similar to the earnings of manual workers in other industries.
It is time that we told the country that the streets of London are no longer paved with gold. We must tell the workers in Wales, in the North of England and in Scotland that there are no fortunes to be made in London. We must tell them that, on the basis of the figures which I have quoted, if they travel to London to find work they are in danger of their living standard going down. Workers throughout the country should know that before they drift towards the London area in search of higher earnings.
Those are remarkable figures, and they are quite astonishing when one realises that two so-called distressed areas, Wales and the North of England, are marginally higher than London. I am not suggesting that London is a distressed area. It is not. It has gained a lot from the masses of professional workers and office staff who have gained as a result of the tables, and whose living standards have increased proportionately more than those of manual workers.
It is suggested that the increased cost of housing, rents, purchases, transport,

and so on, all fundamental factors in the cost of living, add up on average to about 1s. 6d. per hour. If we deduct this figure from the hourly earnings which I have mentioned, London is at the bottom of the table. Therefore, to get rid of this illusion about earnings, and particularly in London, it is necessary to have a different kind of index altogether and get away from the Index of Retail Prices as we know it.
I hope that the Government will take note of that, and that the Chancellor of the Exchequer will note it, too, because not only my right hon. Friend, but previous Chancellors, including those from the party opposite, have claimed that there is a need to disperse industry away from London to take the heat out of wages. If one includes the extra cost of housing, transport and so on, in the London area, one sees that earnings in London are at the bottom of the table in engineering time rates. The policy of dispersing industry from London is based on a false premise, and much of the responsibility for that lies with the type of index we use at the moment. It is necessary to look at this again, and to base it on regional earning standards. as recommended not only by the Consumer Council but by the trade unions.
We welcome the recommendations in the Report published on Wednesday. We congratulate the Committee on recommending a separate index for pensioners. I think that it can do well in influencing the level of pensions and giving us a much truer picture of the struggle which pensioners are facing. We congratulate the Committee, too, on its acceptance of some of the proposals made by the Consumer Council. Incidentally, there is a strong case for having on the Committee a member nominatetd by the Consumer Council.
I hope that my hon. Friend the Undersecretary will consider the possibility of having a direct representative and of strengthening the trade union representation. I understand that Mr. Sidney Greene, of the N.U.R., is the only trade union representative on the Committee. I hope, therefore, that there will be stronger trade union representation.
I hope, as a result, that the Government, having gone with the Committee so far in making the changes which have


been proposed, will start to go in another direction and consider the possibility of a regional index based upon prices, taking greater note of the family the cost of living and not on retail survey and what has been done in that way, to get a different set of tables giving a much more accurate picture of what is happening to the cost of living throughout the country.
The time has come when we must stop kidding the people about the cost of living and what is happening to it. It is utterly wrong to go on repeating these stories which we know to be false. I believe, therefore, that the future of my party and of my Government rests in establishing confidence in these indices in such a way that people can see clearly that the figures presented represent an understanding of how the cost of living has increased over the last 30 years.

3.51 p.m.

Mr. William Molloy: I rise to make only a brief contribution to the debate which has been so ably initiated by my hon. Friend the Member for Tottenham (Mr. Atkinson). The House will agree that he has done an amazing amount of realistic research into an important subject. Although "Index of Retail Prices" is not a particularly attractive title, it nevertheless plays an extraordinarily important part in the lives of ordinary people.
The gravamen of the case so ably submitted by my hon. Friend concerning the important part played by such an index is that it is imperative that it should be accurate and true and should forecast as nearly as possible the true position. It must, therefore, follow that if the converse applies and it does not do that, a serious situation exists. The case made by my hon. Friend is well worthy of examination. I am sure that my hon. Friend the Under-Secretary is aware of the apprehension which is felt, particularly on this side of the House, about the whole question of the index.
Whilst naturally, I have an interest in the country where I was born, I am, like my hon. Friend the Member for Tottenham, a London Member. I always suffer from the fact that I am a Welshman with an Irish name representing an English constituency. The argument put by my hon. Friend has more effect in

Greater London than anywhere else in the country. It is working-class Londoners who suffer most because of some of the errors in the Index of Retail Prices.
It might be difficult immediately to initiate a regional assessment of the index, because it must follow that to pursue it the whole way through would be a complicated business. Let me explain what I mean. This morning we were debating an important matter—the Supplementary Benefit (Determination of Requirements) Regulations, 1968. My right hon. Friend the Minister of Social Security sought leave to introduce provisions to increase those benefits. It is not unreasonable to assume that the Commission involved in that assessment had taken cognisance of the index.
It follows that if the index is true in some parts of the country, it is grievously in error for other parts of the country. To follow that argument to its logical conclusion, my right hon. Friend the Minister of Social Security should have advocated different increases for different parts of the country. I readily understand that many problems would be created in trying to erase what I believe to be a serious error.
I also understand that the Committee which examines the Index of Retail Prices is comprised of a number of people representing all walks of life. Sometimes when we on this side raise this point we are told that the workers are well represented on the board by the trade unions. This may be so in theory, but I think that there may be just as big an error in the theory of trade union representation as there is in the index itself. The probability is that decisions are made on a majority basis. I believe that when one is talking about the cost of living and the index workers should be in the majority to express their views, and I doubt whether that is the case in this instance.
I hope that the Under-Secretary will give full weight to what my hon. Friend has said. In essence we are talking about an instrument that exists and decides all sorts of things. It decides the basic pay in some industries in which the basic wage is determined by a wages council, and when it is arriving at its conclusion no doubt the wages council takes into account the index. I should also have


thought that when some other Ministers are arriving at decisions they must take account of the index. Therefore, if the index is in error it must be put right.
I can understand the problem if it means putting the index on a regional basis. But if, for economic planning purposes, we divided Great Britain into 10 regions, that must be carried through every other aspect of economic life, including the index. Otherwise, one is not being fair.
My hon. Friend has submitted an able case, and I hope that the Under-Secretary will give sympathetic consideration to it and ensure that an examination is initiated so that we get a reflection of the true position in the index. The agony of the situation is that the degree of error that may exist hits more painfully and brutally the more one goes down the scale. It hurts those who are receiving least. Because of this, I ask the Under-Secretary to examine the proposals so ably outlined by my hon. Friend.

3.58 p.m.

The Under-Secretary of State for Employment and Productivity (Mr. Roy Hattersley): I thank my hon. Friend the Member for Tottenham (Mr. Atkinson) for raising this vitally important matter and giving the Government an opportunity to comment on his criticisms which result from his examination of the Index of Retail Prices. I also thank him for his courtesies to me during the first two or three minutes of his speech and particularly for his conclusion that, although he does not believe that the streets of London are paved with gold, the streets of the West Midlands may be. In four hours' time when I return to the bosom of my Birmingham constituents I shall quote his conclusion to them, but I can give him no assurance that they will believe either him or me.
I must say at the outset about my hon. Friend's analysis that I cannot agree with the main criteria that he used to judge the validity of our price estimation or with his comparison of what a man's weekly or hourly earnings would buy in terms of his own product five, 10 or 20 years ago and now. I have no doubt that my hon. Friend is right in saying that only in the electricity supply industry can the worker be sure that he can buy for

his weekly wage more of his output now than he could 30 years ago.
I am equally sure that my hon. Friend would agree that, throughout industry, most working men can anticipate that their Thursday or Friday or end of the month pay packet will enable them to buy more of other people's output than they could 20 or 30 years ago. I am sure that he would not argue about that basic conclusion and would conclude that the analysis he made in these rather limited terms is not the most appropriate for deciding whether the indices are accurate or not.

Mr. Atkinson: But whatever the analysis—

It being Four o'clock, the Motion for the Adjournment of the House lapsed, without Question put.

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Pentland.]

Mr. Atkinson: Mr. Atkinson rose—

Mr. Speaker: Order. The hon. Gentleman had a long innings and I hope that he will allow the Undersecretary of State to speak.

Mr. Atkinson: I only intervene because this is a very important point, Mr. Speaker. It is no illusion that dependence of the standard of living in this country to a large extent revolves around the number of wives who are working. My hon. Friend must surely take into account the fact that workers can buy so much more than they could 20 or 30 years ago because of the extra income brought in by their wives in so many cases.

Mr. Hattersley: I will take that into account in the main part of my speech in which I shall ask my hon. Friend, and anyone else listening or who will read the debate, to draw a distinction between a Cost of Living Index and the Retail Price Index. This is the nub of the argument.
Having exemplified these areas of disagreement between us, I go on to accept at least one of the main points my hon. Friend made about the Retail Prices Index as it stands. There is no doubt that the accuracy of the index is widely doubted. In my view, that doubt stems


from a misunderstanding of the job the Index is intended to do and from the necessarily complicated fashion in which that job is done. It would be wrong to pretend, however, that this scepticism— unwarranted in my view—about its validity is not to be found both inside and outside the House. If for no other reason I welcome this opportunity of trying to dispel some of that scepticism.
The April edition of Focus, the journal of the Consumer Council, crystallised much of the doubt and scepticism and because of the criticism and scepticism expressed there, my right hon. Friend the then Minister of Labour asked the Cost of Living Advisory Committee to examine the specific points the article made. Section VIII of the Report of the Committee deals with the criticism and it is important to establish the general status of the Index before we talk about the adaptation and extensions that my hon. Friends have urged on the Government.
The Index of Retail Prices is not a cost of living index. My hon. Friend the Member for Tottenham talked as if it was and then he went on to wish that it were. I remind him that it is not, and that it is not claimed to be so. There are many complications in compiling a cost of living index rather than an index of retail prices. Not the least is that a retail price index can be an objective and precise thing, the accuracy and validity of which can be demonstrated beyond question.
The criteria which go into the compilation of a cost of living index are, by nature, in part subjective and it is difficult to imagine the calculation of such an index which would not lead to all sorts of suggestions and criticisms that the very principles on which it was based, the very conclusions on which the statistics were calculated, were unjust, inaccurate and the result of a wrong subjective judgment.
The Index of Retail Prices seeks to be no more than its title suggests. It does not measure changes in total expenditure —the total amount spent in order to live or the effects of direct taxation, and so on. All it claims to measure is changes in retail prices of goods and services.
The goods and services included in its survey are generally representative. Great

trouble is taken during the Family Expenditure Survey to ensure that this is so. The items are both representative of consumer spending and indicative of price movements in other related goods, and every effort is made to allow for changes in quality of goods within the index. It is a difficult calculation, but one which must be made if the index is to have real validity.
All these things make the index a complicated calculation and it is in part the complications which raise doubts about its accuracy and give rise to perhaps natural feelings that a system which is so involved must ipso facto be open to doubt. Yet it is these complications, the selection of goods, the weighting of items, the special calculation of housing costs, which make it as accurate an index as it is, and I emphasise again that, within the terms which it sets itself, the calculation of movements in a selected and representative list of goods, it is a very accurate index.
Indeed, the Report of the Advisory Committee, published on Wednesday, includes a considered and unequivocal judgment about the validity of the index. The Committee's judgment was that
in its present form the index is working well and can be accepted with confidence as a satisfactory measure of changes in the average level of the retail prices of goods and services bought by a large majority of households and persons in this country.
But that, of course, is not to say that the index is incapable of adaptation and extension. My hon. Friend will know that some of the adaptations and extensions which he has urged on the House are acceptable to that Committee and to my right hon. Friend. The Fourth Report of the Estimates Committee was sure that some extension was necessary and that the index would be made more useful if it were supplemented by periodical indications of changes in the cost of living for a number of groups.
In its report the Cost of Living Advisory Committee made judgments on exactly this matter, and the House will know that my right hon. Friend has accepted all these recommendations. In paragraph 48 the Report says that movements in the expenditure of pensioners are not necessarily different from the general movement of households simply because the consumption patterns of the


two groups differ. However, in paragraph 50 it concluded that evidence supplied by my Department:
lends colour to the view that the retail price index may not be a reliable measure of changes in the prices affecting the expenditure of pensioner households.
As a result, the Committee recommends that special indices of retail prices should be compiled and published quarterly for one-person and two-person pensioner households. It also recommends that, after some experience has been gained of this type of limited group index, further consideration should be given to compiling indices for low income households with children.
The second group index to which the Committee referred and to which my hon. Friend referred also deserves examination. It is that point which he rightly made when he asked the House to consider the abnormally high costs of housing in London as compared with the rest of the country. It is that sort of point which the Committee examined when it considered the propriety and possibility of regional indices. The Committee concluded that the desirability of compiling and publishing retail price indices for regions and sub-regions could not be accurately assessed before we knew more about the technical problems involved.
I emphasise again that the technical problems of a calculation of this sort have paramount importance. I know very well the scepticism which always greets Ministers who say that they find an idea attractive, but that substantial technical problems are involved. However, my hon. Friend the Member for Ealing, North (Mr. Molloy) put the point admirably and exactly when he talked about the necessity of creating an index which could be trusted and believed. If we are to produce an index which can be trusted and believed, it is essential that the technical problems be overcome, and if the technical solutions are not right, the index is not right, and if the index is not right, it neither justifies nor warrants belief, and the entire operation is, at best, useless and, at worst, dangerous.
If the technical problems cannot be overcome the index is meaningless. It is not enough to say that we need regional indices. We have to be sure that meaningful regional indices can be calculated.

They would need to be, and I am sure that this is what my hon. Friend wants, regional price indices which do not show so much the movement of prices within any one region, but the relationship between the prices in any two, three or five regions.
It is important to know that from, say base year 1968, the cost of living in London or Birmingham or Sheffield has gone up by 5 per cent. over a three-year period. It is much more important to know how the cost of living fared in London as compared with Sheffield, Birmingham, Newcastle or Cardiff. The Advisory Committee agreed that statistics showing regional differences in family incomes do not reliably indicate differences of levels in prosperity unless allowance can be made for inter-regional price differences.
The Committee went on to emphasise the problem facing a worker about to change his job, yet unable to calculate what his real income might be in his new place of employment since he had no idea of what changes in retail prices he would face. The creation of reliable inter-regional indices to meet these needs poses formidable technical problems, set out in great detail in paragraphs 30 to 39 of the Report. To provide such figures would mean that a lower level of precision and more infrequent publication would have to be accepted for these special calculations.
This is not necessarily to say that such indices should not be calculated, but it emphasises the need to examine how accurate and valuable they would be. The report recommends that the technical difficulties should be examined immediately, and I am happy to tell the House that my Department, on the instruction of my right hon. Friend has already begun this examination of the possibility of regional indices.
In short, we recognise the force of my hon. Friend's argument that regional indices are desirable. On the other hand, the practical difficulties may mean that a calculation of such indices would at best be meaningless, and at worst inaccurate and misleading. We are anxious to provide whatever extra information we can. We will only provide it if we can underwrite its validity.
All informed observers, the latest and most important of which is the Cost of Living Advisory Committee itself, agreed that the general Index of Retail Prices is a reliable indication of the movement it seeks to measure. We are naturally anxious to emphasise and reaffirm that accuracy, remind the House and country that an objective Committee has examined its accuracy and underwritten it. We are equally anxious to make sure that any extension of the Index, any new indices based on the Index of Retail

Prices should be similarly free from public criticism.
We should be able, as I can this afternoon, to reaffirm that whatever measurements of prices are given to the House and country, they can be underwritten by the Government as being totally accurate, totally meaningful analyses of the sort of movement they seek to measure.

Question put and agreed to.

Adjourned accordingly at thirteen minutes past Four o'clock.